Perrin: Last week's Stat Can report
- Published on Tuesday, October 16, 2012
By: Steven Perrin
We sometimes reject Statistics Canada’s official figures, for example if the survey took place before a key weather event, if their sample size was too small, or if it’s way out of line with what we’re hearing from the country.
But in this case, with harvest being relatively early and the changes they’ve made since the July report, we are going with their numbers on the major crops.
Overall, while some of last week’s Statistics Canada 2012 crop production estimates came in out of line with our own working numbers, we have been inclined to input the official area and yield estimates, especially in the case of the major crops for which they have a solid sample size.
Compared to most years, harvest advanced much earlier than normal, lending added credibility to the October estimates. Also, in scanning the countryside for ground-level reports from FarmLink’s marketing advisors and clients, we are finding that the shortfall in yields from previous estimates was just as dramatic as today’s government production report reflects.
Some of our strategies are being adjusted accordingly.
The biggest surprise came in canola, even causing some in the trade to discount Statistics Canada’s number, which is why futures closed off the highs. However, we’re inclined to go with Statistics Canada because they fit with what we’re hearing from a broad swath of growers; also because the survey was taken before the big wind storm on Sept. 12.
Regardless, the market is now positioned to make an orderly march higher to levels that will ration demand. No matter what canola crop size working estimate one was using before, to balance the sheet for 2012/13 based on today’s figures, well over half a million tonnes in exports or crush newly needs to be shaved off the demand side.
Heading into the report, most agreed that cereals’ yield potential was quite a bit better than other crops but here too, it appears hot, dry conditions in July and August did more damage than expected. In both spring- and durum wheat-growing areas that were late to harvest, we saw disappointing results causing yields to come in below last year in both cases.
Durum’s yield drop from 2011 was more drastic than spring wheat’s, but this still doesn’t tighten up the balance sheet much. Spring wheat’s drop makes the carryout a little tighter, but we already viewed the long-term wheat price outlook as grinding moderately higher.
Barley yields dropped very significantly, to 58.3 bushels per acre from 64.7 bushels per acre in Statistics Canada’s last report based on a survey in July. This shaves about a million tonnes off the supply side of the balance sheet. However, this is one case where our strategies aren’t going to be materially changed, despite a big drop in supplies because we could see that demand was already being rationed.
As noted above, this is one year where we are inclined to put more stock in these figures and as such, some strategies and plans for upcoming sales are changing at this time. For the most part, Statistics Canada’s numbers ranged from slightly to quite a bit below our previous expectations, although in some cases we may still recommend advancing sales in the short run due to demand-side considerations that trump smaller crop estimates.