But the grain trade is shrugging off the report, as it believes final production numbers for most crops will be larger than what Statistics Canada estimated in Friday’s report.

“I think everyone in the marketplace is of the opinion that the crop conditions have improved since the survey was taken, so this crop is bigger than what the numbers suggest,” said Mike Jubinville of ProFarmer Canada.

StatsCan pegged 2015-16 wheat production at 24.625 million tonnes, at the lower end of expectations and below the 29.281 million tonnes grown in 2014-15.

The final number is likely to be about a million tonnes larger, due to improved weather conditions since the survey was conducted in late July, Jubinville added.

As of Friday morning, U.S. wheat futures markets weren’t reacting to the report, as StatsCan’s estimate was very similar to the latest U.S. Department of Agriculture projection for Canadian wheat, he noted.

StatsCan pegged canola production at 13.343 million tonnes, in the middle of pre-report guesses, but down from the 15.555 million tonnes grown last year.

“The StatsCan (canola) number is too low. It will be adjusted higher in the next two months — I think closer to 14 million tonnes. And our carryout will probably balloon above a million (tonnes),” said Errol Anderson of ProMarket Communications.

Because the production number for canola is likely inaccurate, the trade is dismissing the report and turning the focus back onto North American harvest conditions and China’s economic situation, Jubinville said.

While there are worries about China reducing its purchases of canola due to its economic problems, he said he believes they’ll still be a large buyer of Canadian canola.

“All the fearmongering that’s going on about economic turmoil in China restricting or curtailing their commodity purchases, I don’t think is going to apply to canola,” Jubinville said. “So they’re going to buy whatever they need, and going to eat up whatever extra production we add to this production number.”

— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow her at @TerrynShiells on Twitter.

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With the technical bias pointed lower, further weakness is expected to be in store for the commodity.

“I think the ideas in the trade are that the funds are relatively even so we could see the funds now really start to weigh on this market going into harvest,” said Jerry Klassen, manager of the Canadian office for Swiss firm GAP SA Grains and Produits.

Klassen pegged the next downside target for the ICE canola market at the $450 per tonne level, while other traders say prices could find support at $460 per tonne.

Reports that the Canadian canola crop looks better than first anticipated have weighed on values recently, as has weakness in outside vegetable oil markets.

While the market should stay soft going forward, as harvest will soon be in full swing, traders will also be paying attention to weather conditions during the last few weeks of the growing season, as some of the later reseeded fields still need at least two weeks of frost free weather.

Klassen said he believes there will be a lot of canola coming onto the market once harvest is in full swing, as relatively good prices will make canola the “cash crop” for farmers needing to pay their bills this season.

The upcoming survey-based production report from Statistics Canada will also be watched, as any surprises could cause a knee-jerk reaction in the market.

Pre-StatsCan-report estimates for canola range from 12.5 million tonnes to 14.5 million tonnes.

If Statistics Canada comes out with a figure above 14 million tonnes on Friday, the crop will likely end up being over 15 million tonnes as conditions have improved since the survey was conducted, according to Ken Ball of PI Financial in Winnipeg.

In the longer term, China will continue to be a big player in where Canada’s canola market goes, as it’s been a large buyer of the commodity in recent years.

“I think the wild card variable is how China is going to respond over the next six months with the economic uncertainty,” said Klassen.

“If we don’t see significant interest from China, even with the smaller crop size, the market will have sufficient stocks.”

— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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Yields are likely to be all over the map as weather conditions varied vastly from region to region during the growing season.

Weather conditions ranged from extreme drought in parts of the western Prairies, to excess moisture in the eastern regions of Western Canada.

The areas affected by drought are some of the most prominent durum- and barley-growing regions, so traders will be watching closely to see how much the lack of moisture affected the two crops, said Jerry Klassen, manager of the Canadian office for Swiss firm GAP SA Grains and Produits.

A compilation of pre-report estimates shows the trade generally expects durum production to come in at 4.5 million to 5.2 million tonnes, which compares with 5.19 million in 2014-15. Barley production is pegged at 6.9 million to 7.2 million tonnes, from 7.12 million last year.

Unfavourable weather is likely to lower canola production, which was pegged at 12.5 to 14.5 million tonnes for 2015-16, down from 15.56 million last year.

But what StatsCan says in its report will likely change before the end of the year, as weather conditions and yield prospects have changed since the agency gathered the data.

“The data is more than three weeks old by the time we get it. So, we have to gauge what yield growers would have posted on their crop in the last week of July, when most of the data was gathered,” said Ken Ball of PI Financial in Winnipeg.

“I’m guessing that the (canola) yield was likely lower than what they have on their field now, just from the way the crop appeared at that time,” he added.

Because canola prospects have improved since the survey was done, production figures are apt to grow from StatsCan’s Friday estimate.

“I wouldn’t be surprised if this (canola) crop is well above 14 million tonnes by the time we’re done,” said Ball.

A similar story could be seen for the Canadian wheat crop, but not to the same extent as canola, as crop conditions haven’t improved as much over the last few weeks, according to Ball.

If StatsCan’s estimates are out of line with pre-report guesses, it could cause some reaction in both U.S. wheat futures, and the Canadian canola futures market.

“If the StatsCan report happens to come out above 14 million tonnes for canola, then we could be looking at a crop that’s above 15 million, and that could really start to change the undertones in canola,” Ball said.

“We would still be tight on canola, but not nearly as tight as it appeared a few months ago.”

After the report has been fully digested by traders, they will turn the focus back to weather for the Canadian spring cereal harvest, and to canola fields that are still developing.

“Quite a bit of the reseeded canola needs another few weeks of good weather,” Ball said. “It has accelerated with the warm weather, so maybe it could get by with another two weeks of frost free weather, and there’s nothing in the forecast right now that we’re going to see any frost threat in that time frame. But, you never know.”

— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

Table: The trade’s pre-report estimates for the Aug. 21 Statistics Canada crop production report, which will show Canadian crop production estimates as of July 31, 2015, in millions of tonnes. Final yields from previous crop years included for comparison.

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Average CWRS wheat prices were down by C$7 to $26 per tonne over the week, with bids ranging from about $203 per tonne in the Peace region of Alberta to as high as $217 per tonne in Manitoba, according to price quotes from a cross-section of delivery points across Western Canada.

Quoted basis levels varied from location to location, but generally held steady, to average about $21 above the futures when using the grain company methodology of quoting the basis as the difference between the U.S. dollar-denominated futures and the Canadian dollar cash bids.

When accounting for the currency exchange rates by adjusting the Canadian prices to U.S. dollars, CWRS bids ranged from US$155 to $166 per tonne. That would put the currency-adjusted basis levels at about US$25 to $35 below the futures.

Looking at it the other way around, if the Minneapolis futures are converted to Canadian dollars, CWRS basis levels across Western Canada range from C$33 to $46 below the futures.

Average Canada Prairie Spring Red (CRSR) bids were weaker as well, with bids C$4 to $7 per tonne weaker. CPSR prices came in at about $164 per tonne in Manitoba, $174 to $175 per tonne in Saskatchewan, and $182 to $187 per tonne in Alberta.

Soft white spring (CWSWS) wheat prices were down up by C$3-$5 per tonne, ranging from C$192 to $194 per tonne in Alberta. While weak U.S. futures were bearish, values moved higher as basis levels saw some significant improvements.

Winter (CWRW) wheat prices were mixed. Values were up C$2 to $6 per tonne to $178-$180 in Manitoba and southern Saskatchewan, as basis levels improved enough to move prices higher. Weakness in U.S. futures weighed on values in other parts of Western Canada, where prices were down by C$1 to $3 per tonne, to $174-$187.

Meanwhile, durum (CWAD) prices were down sharply, correcting from a recent rally. Prices were anywhere from C$18 to $27 per tonne lower. Bids in southern Saskatchewan, where the bulk of the crop is grown, were down by $22, at $340 per tonne.

The September spring wheat contract in Minneapolis, off of which most CWRS contracts in Canada are based, was quoted Friday at US$5.235 per bushel, down 21.5 cents from the week prior.

Kansas City hard red winter wheat futures, traded in Chicago, are more closely linked to CPSR in Canada. The September K.C. wheat contract was quoted at US$4.9225 per bushel on Friday, down 15 cents from last week.

The September Chicago Board of Trade soft wheat contract settled at US$4.9925 on Friday, 12.5 cents weaker compared to the week prior.

The Canadian dollar closed Friday at US76.45 cents, down about a third of a cent relative to its U.S. counterpart compared to the previous week.

— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

Table: The weekly snapshot of average published prices for Aug. 4, 2015. Futures prices (US$ per tonne) vary slightly due to changes while data is collected. Cash bids (C$ per tonne) have currency conversion included in the basis. Source: AGCanada.com.

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“I think we’re going into a period where we’re going to make some pre-harvest lows here,” said Jerry Klassen, manager of the Canadian office for Swiss firm GAP SA Grains and Produits.

“It looks like commercial stocks are sufficient to cover the nearby domestic and export demand and it looks like we’re not really seeing a lot of fresh export business step forward here,” he added.

Export buyers are moving to the sidelines as they wait for more clarity on the upcoming canola crop, as there is a wide variety of production estimates floating around.

“The range is probably 12.5 million tonnes to 14.5 million tonnes,” Klassen said. “I think that there’s still an idea that the acreage is actually larger than what StatsCan said, and we’ll also have to get a better handle on yields.”

Weakness in outside vegetable oil markets will also likely keep the canola market under pressure in the coming weeks, with futures expected to find major support at the $480.00 per tonne level, according to Klassen.

If the futures break below the $480.00 per tonne support, the next downside target will be the psychological level of $450.00, he added.

Farmer selling at harvest is expected to be heavy for canola as well, which should put further downward pressure on the market later this summer.

“With spring wheat prices being so weak here, canola is going to be used as a cash crop this year,” said Klassen. “Even if we have a smaller crop size, I think the farmers are going to be selling at harvest very aggressively because the other commodity prices are quite soft. Canola is still at $10.00 to $11.00 per bushel, and that’s a very good price.”

Some of the earliest canola harvesting should begin around the third week of August, with activities expected to be in full swing by the end of the month, he added.

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The projection is below a previous estimate from the company of 12.60 to 13.00 million tonnes, which was released in the June 25, 2015 Pool Return Outlook report.

Drought in parts of the western Prairies, and excess moisture and other weather problems in the eastern regions are likely behind the reduced production prospects, analysts say.

The CWB projection compares to average trade guesses of 13.5 million, the company’s supply and demand table showed.
Agriculture and Agri-Food Canada (AAFC) released their own supply and demand tables on July 21, pegging Canadian canola production for 2014/15 at 14.30 million tonnes.

In 2014/15 Canadian canola production totaled 15.56 million tonnes, according to Statistics Canada figures.

The latest CWB outlook also pegged Canadian canola ending stocks at 488,000 tonnes for 2015/16, which is well below trade estimates of 925,000 tonnes shown on the company’s table, and down slightly from the AAFC projection of 500,000.

CWB is in the midst of conducting a Western Canada wide crop tour, with complete details set to be released on Friday, July 24.

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“What it’s basically going to do is help fill the crops. In some places they had up to two inches of rain which was excellent,” said Harry Brook, crop specialist at the Alberta Agriculture Info Centre.

With cereals heading out, peas in the pod stage and some canola fields starting to flower, the moisture will help make it so Alberta farmers have a crop that is harvestable.

The precipitation won’t likely increase production prospects though, as the damage has already been done to yields by recent dry conditions, Brook added.

And, not all of the dry regions in Alberta received rain, with areas such as the Peace region still looking for more moisture.

While the drought has been the main source of crop damage so far this growing season, grasshoppers have also been causing problems.

“There are people spraying. The real problem is though if you’re spraying but you’ve got grasshoppers coming in and they’re adults,” he said. “Because, how many times do you spray – you can kill the ones that are there, but because they’re adults they fly and they’ll just keep flying in if yours is the only green spot.”

Forecasts are calling for some more rain showers in the province this week, which will help alleviate drought related problems and could benefit hay and pastureland.

“The thing is with the hay land if we get some really good rains, we could get some really decent second cuts which would kind of ameliorate the shortage of hay at the moment,” Brook said.

A few inches of rain on pastureland could also bring them out of dormancy, though their peak growing period has already come and gone.

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“The crop insurance said there was over a million acres reseeded (in Manitoba), and when you reseed, unless you were very early when you started, that’s going to put the crop back,” said Jake Davidson, executive director of Winter Cereals Canada.

“If the canola is not off in time, it’s going to get in our way a bit as far as the seeding of the winter wheat goes.”

Soil moisture conditions could also be a problem this fall for farmers in Saskatchewan and Alberta unless they get some more rain in the next couple of months.

Davidson said some farmers in dry regions are considering seeding rye instead, to see if it’s a hardier crop when it comes to a lack of soil moisture.

This year’s crop is also suffering amid the dry conditions in Alberta and Saskatchewan.

“Saskatchewan is so dry, my guys there are telling me they hardly have crop,” said Davidson.

In Manitoba, some farmers are hoping for some of that drier weather, after recent storms likely caused damage to fields south of the Trans-Canada Highway.

There have also been some issues with fusarium harming Prairie crops, though there are tools to combat the disease, such as fungicides.

“Fusarium is going to become a problem that’s going to become controllable,” said Davidson. “It’s just that farmers are going to have to switch their variety and they’re going to have to go to something like Emerson that is fusarium-resistant.”

Crops in the Red River Valley and other parts of Manitoba are looking good, with few weather problems harming fields so far. Harvest should begin around early August, according to Davidson.

— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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The Saskatchewan Ministry of Agriculture’s wheat midge forecast, released earlier this year, initially showed high risk levels for the insect, but the dryness is hampering their effects on crops.

“Dr. Bob Elliott’s work at Agriculture and Agri-Food Canada has shown that if you don’t get 25 mm of precipitation prior to the end of May, it will affect wheat midge emergence,” provincial insect specialist Scott Hartley said.

“Although some areas did, like down in southeast Saskatchewan was probably one area that did, there are a number of areas that didn’t — it’s just been that dry.”

Wheat midge populations need moisture by the end of May to trigger them to go into their pupal stage, so the dryness results in later, more erratic emergence.

Crop development in Western Canada this year has also varied widely along with weather conditions, which has lowered the crops’ susceptibly to midge damage.

“There’s either some that might have grown out of the stage before midge emerged, others that went through that stage fairly quickly, and other ones probably weren’t even into the susceptible stage by the time midge were emerging,” Hartley said.

As of last Saturday (July 12), wheat midge populations were about 50 to 90 per cent emerged in most of Western Canada, according to a weekly report from the Prairie Pest Monitoring Network.

Even in the regions that got moisture in late May, such as Manitoba and southeastern Saskatchewan, significant damage from the insect hasn’t been reported, according to weekly provincial crop updates.

We’re now coming to the end of wheat midge season, Alberta’s provincial insect management specialist Scott Meers said in a weekly insect update on Thursday, so the chance of the problem getting worse in coming weeks is diminishing.

— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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“The companies know that, generally speaking, farmers aren’t in the mood to sell, so they’re probably trying to maybe encourage deliveries of last year’s durum, so trying to get that out of the bins, which might be hard,” said Neil Townsend, director of market research services with CWB in Winnipeg.

Cash prices for durum in Saskatchewan and Alberta gained between $20 and $37 per tonne during the week ended July 10, to range from $310 to $343 per tonne, according to data collected from a number of delivery points in Western Canada.

Some buyers are also looking to lock in some new-crop contracts for high-quality durum, due to poor-quality crops out of Europe and Canada last year.

Farmers, however, are still waiting for the market to move higher as drought continues to plague many growing regions in Alberta and Saskatchewan.

While recent market strength is mostly linked to the problems in Western Canada, European crops are also running into weather issues, Townsend said.

“It’s not to the same scale or scope as what Canada has, but it has faced a little bit of weather-based adversity. The Italian crop went down a little bit,” he added. “They had a very tough crop last year, so this is probably almost more of a residual impact from that.”

While Canada’s durum crop also had a tough year in 2014 due to rains at harvest, it’s looking like quality will improve this year.

“I think you generally would say there’s a correlation between a drier, hotter, smaller crop and better quality. But that being said, the quality is not going to be totally set,” Townsend said.

A number of weather events, including rain at harvest time, too much heat or cool temperatures could all still lower the quality of the crop, he added.

While Townsend expects this year’s quality to be better than last year, the same can’t be said for production, as drought reduces yield prospects.

CWB’s current estimate calls for four million tonnes of durum production in 2015-16, which would be down from last year’s 5.2 million, despite area increasing by a million acres this spring.

“It’s also down from last week, and with the weather conditions that are currently in place we’ll probably be taking it down a little bit next week as well,” Townsend said.

Assuming the hot weather pattern stays in place over durum-growing areas, he said, CWB puts the possible low end of its durum crop estimate in a range around 3.5 million tonnes.

— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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