AAFC Forecasts Bigger Wheat Exports in 2018/19
Last week we got Agriculture Canada’s monthly version of the WASDE, showcasing grain supply and demand in the Great White North. This offset the fact that, going into the third weekend of October, there was still about 6.3 million metric tonnes (MMT) of spring wheat left to combine, across nearly 4.67 million acres.
From AAFC though, non-durum wheat harvested acres from 98.7% in their September estimate by 322,000 acres this month for 97.55% (the 5-year average is 96.6%). Combined with an average yield (both spring and winter wheat) that was bumped up by 2.5 bushels per acre (bpa) to 51 total, 2018/19 Canadian non-durum wheat production is now estimated by AgCanada at 25.31 MMT.
Compared to AAFC’s September non-durum wheat production forecast of 24.47 MMT using 48.5 bushels per acre yield, this new non-durum wheat production estimate is +5.2%.
It also matches StatsCan’s September satellite-based estimates that suggested average non-durum yields of 51 bpa and total production of 25.3 MMT. In that report, average spring wheat yields were estimated at 49.4 bpa with a spring wheat harvest of 22.3 MMT.
On the demand side of things, AgCanada says total non-durum wheat exports in 2018/19 will come in at 18 MMT, 600,000 more than their September estimate of 17.4 MMT. If realized, it would be the third-largest export number for Canadian non-durum wheat exports ever.
Given the strong start to the 2018/19 export campaign, hitting that number certainly seems plausible. Through Week 11 of the 2018/19 crop year, the Canadian Grain Commission says that there has been 4.04 MMT of Canadian non-durum wheat exports, up nearly 30% year-over-year.
Combined with total domestic use of 8.08 MMT (+219,000 MT month-over-month), Canadian non-durum wheat carryout for the 2018/19 crop year are forecasted to come in at 4 MMT. This would be the tightest since 2012/13. It also corresponds to a stocks-to-use ratio of 15%, down from last month’s estimate of 16%.
While futures have dipped a bit, CWRS wheat basis levels are looking pretty good right now for December 2018 movement.
Comparably, CPS wheat prices on the cash market are still tracking 30% above compared to where we were a year ago.
For durum wheat, Ag Canada updated its production estimate to match that of September’s satellite-based forecast from StatsCan, which showed average yields of 34.6 bushels per to acre to produce 5.71 MMT. On the demand side of things, AgCanada says durum exports in 2018/19 will come in at 4.6 MMT, 200,000 MT less than their September estimate of 4.8 MMT.
Ag Canada did recognize though the amount of this year’s durum harvest still left out by increasing the amount of the crop going into feed, waste, & dockage column by 365,000 MT to 586,000 MT. I personally think that that number could rise further to somewhere between 800,000 and 900,000 MT.
Overall, the exports, combined with total domestic use of 992,000 MT, Ag Canada is forecasting Canadian durum ending stocks for the 2018/19 crop year to come in at a very bearish 1.6 MMT. This is up 600,000 MT month-over-month and 8.3% more than the 2017/18 carryout of 1.477 MMT. It also equates to a stocks-to-use ratio of 29%, up from last month’s estimate of 18%.
Ultimately, there is still a lot of question marks about harvest and quality left to answer, but time will only give us those answers. From a relative pricing perspective though, CPS and HRS opportunities today aren’t to be ignored.
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