Highlights

Post is forecasting total production of wheat, barley, corn, and oats to reach 52.6 million metric tons (MMT) in 2017/2018, a seven percent decrease from 2016/2017 production levels of 56.7 MMT. Wheat, corn, and barley production are forecast to decrease by 10 percent, three percent, and nine percent respectively, from 2016/2017; oat production is forecast to rise by 12 percent. Total imports are forecast to climb six percent to make up for a drop in domestic supply and production in 2017/2018. Total exports are forecast to increase modestly by just under two percent due to strong beginning domestic stocks of wheat and barley. Total supply of wheat, corn, barley and oats is forecast to decrease by 2.7 percent at 66 MMT as increased carry-in is expected to partly offset the drop in production. In general, the impact on grain prices in Canada continues to be partly mitigated by the weaker Canadian Dollar.

Executive Summary:

Based on historical trends and current market conditions, area seeded to field crops in Canada for 2017/18 is forecast to decrease marginally compared to 2016/17. Post is forecasting total harvested area of wheat, corn, barley, and oats in 2017/18 will be 13.6 million hectares, up 1.8 percent from 2016/17. Assuming normal conditions and yield, Post foresees total production at 52.6 MMT down seven percent from the previous year’s generous yields.

Total imports are expected to reach 1.78 MMT, up six percent from 2016/17, while exports are forecast up by a modest 1.8 percent to 25.25 MMT as supplies fall by 2.7 percent to 66 MMT. Post is forecasting domestic consumption at 31 MMT down one percentage point from the year before as more focus is placed on exports, leaving ending stocks at 10 MMT, down 16 percent from the more bountiful 2016/17 crop year.

WHEAT OUTLOOK

Wheat

2015/2016

2016/2017

2017/2018

Market Begin

Aug 2015

Aug 2016

Aug 2017

Canada

USDA

Official

New

Post

USDA

Official

New

Post

USDA

Official

New

Post

Area Harvested

9,577

9,577

8,878

8,878

0

8,97

Beginning Stocks

7,09

7,09

5,171

5,171

0

6,656

Production

27,594

27,594

31,7

31,7

0

28,6

MY Imports

491

491

485

485

0

440

TY Imports

492

492

485

485

0

440

TY Imp. from U.S.

340

340

0

0

0

0

Total Supply

35,175

35,175

37,356

37,356

0

35,696

MY Exports

22,134

22,134

20,5

20,5

0

21

TY Exports

22,141

22,141

20,5

20,5

0

21

Feed and

2,67

2,67

5

5

0

3,5

Residual FSI

5,2

5,2

5,2

5,2

0

5,5

Total Consumption

7,87

7,87

10,2

10,2

0

9

Ending Stocks

5,171

5,171

6,656

6,656

0

5,696

Total Distribution

35,175

35,175

37,356

37,356

0

35,696

Production

For 2017/18, Post is forecasting a modest one percent increase in area harvested for wheat. Some parts of the Canadian Prairies experienced slowdowns in their fall 2016 harvest forcing some farmers to leave crops in the field due to early onset of winter weather conditions. Consequently, spring 2017 seeding may be delayed for the major wheat-producing region; there have also been reports of higher winter precipitation leading to a soggy spring in Alberta and Saskatchewan further delaying seeding. In spite of a slight increase in wheat acreage, Post is forecasting a return to average yields in 2017/18. Production of wheat is forecast at 28.6 MMT, down 10 percent from 31.7 MMT in 2016/17.

Trade

The average crop year producer price in Canada for wheat is forecast to increase from 2016/17 because of the lower world supply. Post forecasts that the tighter world supply of wheat coupled with a weaker Canadian Dollar will poise Canada to step up exports in 2017/18 by 2.4 percent with 21 MMT. It logically follows that Post is also forecasting a 9 percent decline in imports of wheat in 2017/18 with 440 TMT due to stronger beginning stocks, tighter world supply, and a lower Canadian Dollar.

Consumption

Post expects that lower production in 2017/18 will result in reduced overall domestic consumption, particularly with Canada taking advantage of its weaker dollar and a lower world supply to raise exports. Post is forecasting domestic consumption at 9 MMT, a 12 percent drop from 2016/17. Total domestic consumption of wheat in 2017/8 is estimated at 25 percent of total supply, compared with 27 percent the previous year.

Stocks

Lower production in 2017/18 is expected to be offset by stronger carry-in stocks from 2016/17 at 6.7 MMT, up by 29 percent. Post is forecasting the lower total supply in 2017/18 to result in a return to average ending stocks at approximately 5.7 MMT, down 14 percent from 2016/17.

CORN OUTLOOK

Corn

2015/2016

2016/2017

2017/2018

Market Begin

Sep 2015

Sep 2016

Sep 2017

Canada

USDA

Official

New

Post

USDA

Official

New

Post

USDA

Official

New

Post

Area Harvested

1,312

1,312

1,325

1,325

0

1,315

Beginning Stocks

1,402

1,402

2,243

2,243

0

2,543

Production

13,559

13,559

13,2

13,2

0

12,847

MY Imports

1,374

1,374

1

1

0

1,14

TY Imports

949

949

1

1

0

1,14

TY Imp. from US

942

942

0

0

0

0

Total Supply

16,335

16,335

16,443

16,443

0

16,53

MY Exports

1,738

1,738

1

1

0

900

TY Exports

1,764

1,764

1

1

0

900

Feed and Residual

7,073

7,073

7,5

7,5

0

7,82

FSI Consumption

5,281

5,281

5,4

5,4

0

5,56

Total Consumption

12,354

12,354

12,9

12,9

0

13,38

Ending Stocks

2,243

2,243

2,543

2,543

0

2,25

Total Distribution

16,335

16,335

16,443

16,443

0

16,53

Production

Area seeded to corn in 2017/18 is facing competition from soybeans on better returns. Post is forecasting corn area down slightly by 10 thousand hectares in 2017/18 at 1.3 million hectares harvested. Consequently, Post is estimating corn production at 12.8 MMT, down approximately three percent from 2016/17.

Trade

In spite of generous beginning stocks of corn in 2017/18, Post is forecasting corn imports will be up 14 percent from 2016/17 at one MMT to make up for the small drop in production. Post is forecasting a 10 percent drop in exports of corn at 900 TMT in 2017/18 compared with 1 MMT in 2016/17 due to tighter domestic supplies contrasting with higher global supply. Post has chosen to revise its 2016/17 corn export numbers down to be more consistent with USDA’s final estimate from 1.7 MMT to one MMT.

Consumption

Post is forecasting total consumption of corn for 2017/18 at 13.4 MMT, a 3.7 percent increase from the previous year. Feed and residual use is forecast at 7.8 MMT, up 320 TMT due to increased livestock feeding, while a rise in ethanol production encouraged by emerging environmental policy is bringing up industrial use of corn up three percent to 5.56 MMT.

Stocks

Beginning stocks of corn in 2017/18 are forecasted at an unprecedented 2.5 MMT; even bumper crops in 2013/2014 topping 13 MMT did not result in such a high carry-over, most likely due to strong prices at that time. Post is forecasting that 2017/18 ending stocks will return to average levels around 2.25 MMT, down 11.5 percent from the previous year; this brings the stock-to-use ratio for 2017/18 back down to 13.6 percent from 15 percent the year before, and more closely in line with the historical average.

BARLEY OUTLOOK

Barley

2015/2016

2016/2017

2017/2018

Market Begin

Aug 2015

Aug 2016

Aug 2017

Canada

USDA

Official

New

Post

USDA

Official

New

Post

USDA

Official

New

Post

Area Harvested

2,354

2,354

2,22

2,22

0

2,27

Beginning Stocks

1,217

1,217

1,443

1,443

0

2,05

Production

8,226

8,226

8,8

8,8

0

8

MY Imports

161

161

75

75

0

75

TY Imports

131

131

75

75

0

75

TY Imp. from U.S.

31

31

0

0

0

0

Total Supply

9,604

9,604

10,318

10,318

0

10,125

MY Exports

1,193

1,193

1,7

1,7

0

1,75

TY Exports

1,146

1,146

1,7

1,7

0

1,75

Feed and Residual

5,768

5,768

5,965

5,965

0

6,178

FSI Consumption

1,2

1,2

1,2

603

0

697

Total Consumption

6,968

6,968

7,165

6,568

0

6,875

Ending Stocks

1,443

1,443

1,453

2,05

0

1,5

Total Distribution

9,604

9,604

10,318

10,318

0

10,125

Production

Although Post is forecasting a two percent increase in harvested area of barley at 2.27 million hectares for 2017/18, this modest rise in acreage is not expected to translate into higher production compared with 2.2 million hectares in 2016/17 which yielded 8.8 MMT. Instead, Post expects to see a return to normal yields in 2017/18 placing barley production at 8 MMT.

Trade

Post expects that strong beginning stocks will offset the drop in production placing the need for imports in 2017/18 at the same level as the previous year of 75 TMT. Despite a drop in production, Post is forecasting a three percent rise in exports at 1.75 MMT due to higher domestic supplies and a lower Canadian Dollar creating favorable opportunities for exports.

Upon examining Statistics Canada’s March 2017 Outlook for Principal Field Crops, Post has revised its export numbers from 2016/17 to better reflect those statistics, placing the outflow of barley from Canada at 1.7 MMT, up from the previous estimate of 1.37 MMT.

Consumption

Post foresees a five percent increase in total domestic consumption of barley for 2017/18 with an estimate of 6.9 MMT driven by higher feed use for hogs and cattle. Post has revised domestic consumption estimates from 2016/17 to better reflect Statistics Canada’s final numbers on food and industrial use, which were likely closer to 700 TMT according to Statistics Canada’s albeit even more conservative estimate. Post has also revised its 2016/17 feed and residual use estimate up from 5.8 MMT to 6.2 MMT.

Stocks

Post forecasts beginning stocks of barley in 2017/18 at two MMT, up 42 percent from 2016/17, the highest level reported since 2010/11 when that number was estimated at just over 2.5 MMT. Ending stocks for 2017/18 are expected to return to normal levels at 1.5 MMT, a 27 percent drop from 2016/17.

OATS OUTLOOK

Oats

2015/2016

2016/2017

2017/2018

Market Begin

Aug 2015

Aug 2016

Aug 2017

Canada

USDA

Official

New

Post

USDA

Official

New

Post

USDA

Official

New

Post

Area Harvested

1,055

1,055

895

895

0

1

Beginning Stocks

673

673

928

928

0

693

Production

3,428

3,428

3

3

0

3,16

MY Imports

10

10

15

15

0

17

TY Imports

10

10

15

15

0

17

TY Imp. from U.S.

10

10

0

0

0

0

Total Supply

4,111

4,111

3,943

3,943

0

3,87

MY Exports

1,567

1,567

1,6

1,6

0

1,6

TY Exports

1,666

1,666

1,6

1,6

0

1,6

Feed and Residual

816

816

850

850

0

880

FSI Consumption

800

800

800

800

0

820

Total Consumption

1,616

1,616

1,65

1,65

0

1,7

Ending Stocks

928

928

693

693

0

570

Total Distribution

4,111

4,111

3,943

3,943

0

3,87

Production

Seeded area for oats is expected to rise in 2017/18 spurred on by reports of strong U.S. oat futures prices compared with alternative crops. Post is forecasting that area harvested of oats in 2017/18 will be up 12 percent at one million hectares compared with 895 hectares in 2016/17. Assuming average yields, Post estimates oat production at 3.16 MMT in 2017/18, a five percent increase from 2016/17.

Trade

Post is forecasting a slightly higher need for imports of oats in 2017/18, up two TMT from the previous years due to lower carry-in stocks and average production levels. Exports are expected to remain unchanged in 2017/18 at 1.6 MMT as global supply and market conditions remain stable.

Consumption

Post is forecasting that total domestic usage of oats in 2017/18 will increase by three percent due to slightly higher feed use and trend human consumption. Post is estimating that feed and residual use of oats will rise by 30 TMT to 880 TMT in 2017/18 and that food consumption will inch up 20 TMT to 820 TMT.

Stocks

The 2016/17 crop year benefitted from high beginning stocks due to large production the year before. For 2017/18, Post is forecasting a return to average production and ending stocks at 570 TMT, down 18 percent from 2016/17.

POLICY DEVELOPMENTS

Rail Transportation Update

Although industry consultations on the Fair Rail for Grain Farmers Act wrapped up in December of 2016, there is still no permanent legislation in sight. Transport Minister Marc Garneau has said he hopes to have the new legislation in place before the start of the next harvest, which begins August 1st. However, no legislation has yet been tabled in the House of Commons. Bill C-30 was first introduced as a response to a severe backlog in the Canadian grain transportation system in the winter of 2013/2014 following a bumper crop. Temporary measures were extended for one year past its original July 2016 expiration date in order to give the Transport Minister time to learn the file and come up with a permanent plan. The current Fair Rail for Grain Farmers Act, temporary emergency legislation designed to tide the system over while a long term fix is found, expires in July 2017.

American Farmers Eye Fairer Grain Grading Rules in NAFTA Renegotiation

Recent talks of renegotiations to the North American Free Trade Agreement (NAFTA) are bringing new hope for American grain farmers seeking fairer treatment under Canadian grain grading rules. Current legislation does not allow for foreign grain, even if it is a variety that is registered to be grown in Canada, to be issued a grade by the Canadian Grain Commission. Under current legislation, U.S. wheat delivered to a Canadian grain elevator is sold as either feed grade (lowest grade) or according to a specification at any price agreed to by the buyers and sellers.

There have been calls from industry on both sides of the border to level the playing field for U.S. farmers delivering grain to Canadian elevators by allowing for official grading, handling, and export of U.S. grain through Canada. Although legislation was introduced into the House of Commons in late 2014, Bill C-48, the Modernization of Canada’s Grain Industry Act, did not make it beyond its first reading before it was stalled and ultimately swept away in the shuffle of the fall 2015 general elections.

Canada and China Potential Trade Agreement

Global Affair Canada announced in March that it is launching consultations on a potential Canada-China free trade agreement. This comes six months after China threatened to reduce dockage allowances on imports of canola from 2.5 percent to 1 percent over concerns of blackleg disease. However, Canadian Prime Minster Justin Trudeau was successful in extending current dockage rules beyond the September 1st deadline. China’s experience in recent FTAs (New Zealand, Australia, and Chile) suggests that they may be prepared to address tariffs and other trade barriers in some sectors (malt, barley, pulses, beef, and pork). China is Canada’s second-largest single-country trading partner and a key market for Canada in the Asia-Pacific region. In 2016, two-way merchandise trade amounted to $85.3 billion. China accounts for nearly one half of Canadian canola exports; in 2015, Canadian exports of canola for oilseed crushing were valued at $2 billion. “By promoting and expanding market access to China, the government is ensuring our agriculture industry remains a central driver of the Canadian economy,” Agriculture and Agri-Food Minister Lawrence MacAulay said about the negotiations. All interested parties are welcome to provide a written submission in response to the Canada Gazette notice until June 2, 2017.