The Canadian agriculture ministry cut its outlook for spring wheat plantings, as price expectations ease.
The Department of Agriculture and Agri-Food (AAFC) sees spring wheat plantings growing slower than thought, while winter wheat plantings fall, and yields return to average levels.
The AAFC also unveiled a big trim to canola stocks numbers, as it raised its ideas of consumption in the season just finishing.
Smaller wheat sowings
AAFC forecast spring wheat sowings to rise by 3% year-on-year, compared to the 4% rise forecast last month, with durum sowings also down.
This yields total wheat sowings of 9.15m hectares, compared to the 9.33m forecast a month ago.
And with yields expected to return to average levels, this implies production of 28.60m tonnes.
This would be down 3.12m tonnes year-on-year, and 500,000 tonnes below AAFC’s January forecast.
G3 cuts Canadian price outlook
Late last month G3, the Canadian wheat handler, lowered its outlook for wheat returns by Can$5-7 a tonne, depending on grade.
“With harvest underway in South America and winding down in Australia, production of grains and oilseeds in these regions is now being confirmed as very good and this is keeping a lid on export values in general,” G3 said.
“In currency markets, the US dollar has continued to build strength against most other currencies, with the Canadian dollar being an exception.”
“This is putting significant downward pressure on Canadian returns.”
Spring wheat rally fades
The adjustment follows signs of easing momentum in the Minneapolis spring wheat market.
The premium of spring wheat to Minneapolis Chicago is down about 50 cents a bushel from its highs last month, to just over a dollar a bushel.
And prices for new crop spring wheat futures in Minneapolis eased sharply from eight-month highs late last week, as the September contract fell by 1.9% on Thursday.
But AAFC left its forecast for wheat exports unchanged at 21.30m tonnes, up 300,000 tonnes year-on-year thanks to rising durum exports.
Much tighter canola market
AAFC also slashed its idea for canola stocks by 0.8m tonnes, to 1.1m tonnes, by the end of 2016-17.
The adjustment came from increases to canola crush, exports and feed waste and dockage.
The adjustment leaves the domestic canola stocks-to-use ratio at a tight 5.9%.
“The tightening of the stocks-to-use ratio should support canola prices above levels implied by world soybean oil and soybean meal prices,” AAFC said, forecasting Canola to average Can$505-535 a tonne, compared to Can$509 a tonne in for 2015-16.
Easing vegoil prices
AAFC maintained its forecast for Canadian canola plantings to rise by 3%, to 8.5m hectares, as returns “remain attractive compared to other field crops”.
“Production is forecast to rise marginally to 18.m tonnes, slightly under the record 18.6m tonnes in 2013-14.”
World stocks, and therefore stocks-to-use ratio, are seen remaining flat by the end of next season.
For 2017-18 canola prices are forecast to ease slightly to Can$490-530 a tonnes, thanks to easing world vegetable oil prices.