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Canadian Wheat and Canola Ships South into U.S.

February 5, 2014
By: Fran Howard, AgWeb.com Contributing Writer
Saskatchewan Canada harvest 2013
  
 
 

Year-end stocks of principal field crops in Canada were nearly 30 percent larger than a year earlier due to bin-busting 2013 harvests and a major transportation backup in getting harvested crops to ports. As a result wheat and canola are moving south into the United States.

"Canada is experiencing a transportation debacle. We can’t get grain to the port in time. We won’t be able to catch up until the end of the year," says Wayne Palmer, senior market analyst for Agri-Trend, Red Deer, Alberta, Canada. "We need a miracle to straighten it out."

Canadian rail companies are providing a share of rail cars to agriculture, but grain companies oversold the country’s port capacity, and the rail companies cannot keep up with the demand, notes Palmer.

That means the 2013 crop won’t be totally moved when the 2014 harvest comes in, says Palmer. And that’s creating a lot of concern for Canadian producers. Last year when producers were cash rich, they didn’t forward sell, and when prices started to plunge, they waited for another rally, which has not materialized. Thus, on-farm stocks of grains and oilseeds are huge if not record large.

Record On-Farm Wheat Stocks

"There is a lot of grain moving south into the United States. A lot of wheat is moving south from Manitoba into North Dakota, which hasn’t happened before," says Brian Voth, senior market coach for Agri-Trend. Wheat is also moving to both the East and West Coasts of the United States.

Total stocks of wheat climbed 37.7 percent from December 31, 2012, to 28.4 million metric tons. The rise in stocks was the direct result of a 38 percent annual increase in 2013 wheat production. On-farm stocks are at a record-high 25 million metric tons, up 52.2 percent from year-end 2012. Commercial stocks fell 19.2 percent to 3.4 million metric tons, according to the Stocks of Principal Field Crops report released Tuesday, February 4, by Statistics Canada.

"Producers’ thinking will switch from growing wheat to oats, flax, and specialty crops," says Palmer. "Margins on wheat don’t add up. The canola-bean spread has also widened to historical levels."

Canola Stocks at Record High

Year-end canola stocks of 12.6 million metric tons were 55.3 percent larger than a year earlier. On-farm stocks increased 65.7 percent compared with 2012 levels to 11.7 million metric tons. Commercial stocks of canola fell 14.6 percent below year-earlier levels. Canola production at 18 million metric tons in 2013 was 29.5 percent larger than 2012.

A lot of canola is also moving south into the United States to crush plants in Washington and Minnesota, notes Voth. "It’s more economical for farms to be shipping grain south this year," he adds.

Demand for canola is strong but elevators are backed up on deliveries by 10 weeks or so and thus cannot make additional forward sales for fear of defaulting, says Palmer.

Corn at Record, Too

Year-over-year corn stocks for grain rose 10.8 percent. Canadian producers were holding a record level of corn at the end of the year, but commercial stocks were 6.5 percent lower.

Soybean stocks rose 2.4 percent to 2.7 million metric tons as of December 31. On farm inventories rose 21.6 percent to 1.9 million metric tons, while commercial stocks fell 25 percent to 800,000 metric tons.

Total stocks of oats rose 39.7 percent to 2.9 million metric tons, with on-farm stocks up 45.2 percent and commercial stocks down 9.7 percent. Total stocks of barley were up 27.2 percent to 6.7 million tons, due to a 30 percent increase in on-farm stocks.

The survey, which took place from January 3 to 12, asked 10,682 Canadian farms to report the amounts of grain, oilseeds, and specialty crops they were holding. The Canadian Grain Commission provides data on commercial stocks.

 

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RELATED TOPICS: Wheat, Marketing, Global Markets

 
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