Canada Markets

Agriculture and Agri-Food Canada released its first look at Canada's 2015/16 supply and demand for grains in its latest Canada: Outlook for Principal Field Crops report. Of the 10 crops chosen for this analysis, all are expected to see acres increase, largely due to a reduction in summerfallow acres. The 10 crops chosen would result in a 1.3 million increase in seeded acres, which would lead to record low summerfallow acres below the 3.8 million acres estimated in 2013.

The largest increase in seeded acres are suggested to take place with durum where acres are expected to be up 15% from 2014, flax, up 11.3% from last year and lentils which are expected to increase 11.2%. Of the crops shown, the smallest year-over-year percentage increase is expected to be seen in wheat, up .4% from 2014/15 and canola, where acres are seen to be increasing 2.1% year/year.

The 15% increase in durum acres would see 5.46 million acres seeded which would be the highest acres seeded in six years although still far from a record. Given assumptions made regarding estimated yields, this will lead to a slight reduction in total supplies given tighter carry-in stocks. Tighter carry-in stocks are also responsible for a sharp reduction of total supplies of wheat (excluding durum) with total supplies for 2015/16 said to be 8.9% below last year.

A 2.1% increase in canola acres is expected to result in a 2.6% reduction in total supplies, due to the almost one million metric tonnes reduction expected in the stocks carried into the 2015/16 crop year.

The largest increase in total supplies is expected in flax, with an 11.3% increase in expected acres suggested to result in an 18.7% increase in total supplies given a higher carry-in and production.

Of the crops looked at, lentils are showing the greatest upside price potential in the upcoming crop year. This is despite an increase in seeded acres, supplies and an expected increase in ending stocks. While the average price for lentils is estimated to range from $510 to $540/mt in 2014/15, next year's returns are expected to see prices rise to $560 to $590/mt. Flaxseed returns, on the other hand, are expected to fall from a range of $465 to $495/mt in 2014/15 to a range of $400 to $440/mt in 2015/16 as flax responds to weaker global oilseed markets.

As expected, movements in the Canadian dollar against its U.S. counterpart will play a huge role in determining Canadian grain prices. Today, Goldman Sachs released a forecast suggesting the Canadian dollar will fall to $.781 CAD/USD in three months, down to $.735 by December 2016 and $.714 CAD/USD by the end of 2017. A scenario such as this could be a huge boon to Canadian producers.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

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