Aug 31: 19.2 MMT of 2018 Canadian Canola Production

In its first canola production report for 2018, on Friday, August 31, Statistics Canada estimated this year’s Canadian canola crop at 19.2 MMT.  

This was lower than the average pre-report forecast of 20.7 MMT. 

In its first canola production report for 2018, on Friday, August 31, Statistics Canada estimated this year’s Canadian canola crop at 19.2 MMT.  This was lower than the average pre-report forecast of 20.7 MMT.

Thus, this can be viewed as bullish.

The projected decline in canola production is the result of (1) seeded acres dropping by 1.7% to 22.7 million acres  reported in the June 2018 StatsCan acreage report), and (2) average yields falling by 9% year-over-year to 37.5 bushels per acre

Statscan-Aug-2018-Canola-Production-Yields

There is a big question in this report that hasn’t been answered though: how has August’s Canadian weather impacted canola yields and production. We need to bear in mind that the StatsCan survey was conducted in July. Since then, the Canadian Prairies have been pretty dry and crops were under significant heat stress.

Therefore, we might expect to see the yield and production numbers in the September 19 data/model-based estimates of Canadian crop production come in a bit smaller than what we’re seeing here today.  Our gut says that these numbers might be 5-10% smaller than what the August report is showing.

The other thing to keep in mind is that the August production estimate from StatsCan for canola tends to be, on average, 23% below the final production number released in December.

While we take government estimates (especially those from StatsCan) with a grain of salt, this one might take a full shaker-worth since the August weather might be so impactful. Given these growing conditions, we think it would pretty tough for StatsCan to review their August production number up by more than 1 MMT. That being said, we’re not going to count out the possibility that it could more.

In the meantime, we saw canola futures rally a bit, with the November 2018 contract trying to push back up above $500 CAD / MT. Ultimately, the market is likely pricing in this year’s crop (the third-largest ever), but obviously also a bit antsy as to what happens in the US, not just on NAFTA, but also Chinese-American relations (re: soybeans).

H/T: Statistics Canada
About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.