Canada Markets
Implied Dec. 31 Grains Stocks vs. Five-Year Average Stocks
On February 4, Statistics Canada is due to release its first look at Canadian grain stocks this crop year by releasing estimates of grain stocks as of December 31. While not a forecast for the upcoming report, this analysis looks at the implied level of stocks given Agriculture and Agri-Food's estimates of 2014/15 total supply and deducting the five-year average demand or disappearance for the August 1 to December 31 period in order to calculate December 31 stocks, as seen by the blue bars on the attached chart. These volumes are then compared to the five-year average of December 31 stocks as provided by Statistics Canada, as indicated by the red bars.
While this analysis would indicate most crops could see December 31 stocks reported to be equal or higher than their respective five-year averages, data suggests stocks for both barley and lentils could be tighter than five-year averages and could prove supportive for both these markets.
P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]
Despite a carry-in of barley of 1.924 mmt into the 2014/15 crop year which was slightly higher than the five-year average, Canada's 7.1 mmt crop is the lowest on record and resulted in total supplies for 2014/15 of 9.061 mmt, 19.3% below the previous year and the lowest on record. This analysis would suggest that deducting the average August 1 through December 31 demand or disappearance over the past five years of 4.3 mmt would lead to implied stocks of 4.751 mmt, 23.4% below the five-year average.
December 31 stocks could also be supportive for lentil prices. With carry-out stocks for 2014/15 already estimated to fall 70% to an extremely tight 50,000 mt according to AAFC supply and demand estimates, it's likely that this tightness will appear in the December numbers. Given AAFC's estimate of total supplies at 2.016 mmt for 2014/15 and average 5-year disappearance of 810,000 mt in the August through December period, implied December 31 stocks would be 1.206 mmt, 12.5% below the five-year average.
Cliff Jamieson can be reached at cliff.jamieson@dtn.com
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