Ag Canada has updated its supply and demand tables for major field crops and there were adjustments that are gaining attention. One of the major adjustments was the canola feed, waste and dockage for canola reported to be (-727,000mt).
So what does this negative number actually mean for the canola market?
According to John Deputter, of Deputter Publishing:
The sharp reduction in feed, waste and dockage into negative territory almost certainly reflects the reality of a torrid demand pace that – at least on paper – has nearly outstripped the available supply. Of course, feed, waste and dockage cannot be allowed to remain as a negative number, so it is inevitable Ag Canada will have to increase the total supply at some point. In order to do that, the most likely course of action is an upward revision in Statistics Canada’s 2016 canola production estimate of 18.42 million tonnes.
According to a blog post by Dwight Nichol, DLN AgVentures the use and adjustment can be explained as follows:
Almost everyone, myself included, has believed all along that either there were larger than reported seeded acres, late and spring harvested acres were not counted, or farmers did their usual underestimating of yields again. If I had to bet I believe the error is in harvested acres. Data shows 5.7% less harvested than seeded acres in 2016, the lowest I could find on record. While this number made perfect sense when it was last updated December of last year, the survey which concluded this was completed in November and there was still a lot of crop out. That crop has since been harvested or destroyed, and I think we need to account for the harvested part. I will repeat myself here “this is not a surprise” and shouldn’t affect market prices. I have been reporting this adjustment was needed since the December report was released 10 months ago. StatsCan also can, and does, adjust yield in their August report as well (Aug 31 this year). Everyone knows farmers estimate on the low side when answering StatsCan so easy to add a little to yield in either 2014, 2015, or 2016.
The reason for this adjustment, and the reason everyone saw it coming, is that estimated July 31 commercial and farm inventories totalled the 1.2 million mt, or at least that is what data shows. That is 600K mt more than estimates a month ago. If you take 2016 total reported Supplies of 20.5 million mt and subtract known Demand of 20.4 million mt there should only be 100K remaining. They can now “prove” that false through commercial and farm stocks data so they need to make an adjustment. This AAFC report doesn’t attempt to find the error, instead using a negative demand for Feed, Waste & Dockage. We only have to wait a week for the next StatsCan report to show where the “mistake” is and learn of true adjustment. That report will also show early August surveyed yield estimates. Little or no harvest done at that time so expect estimates to be on the low side
Hear this clip of Dwight Nichol, from the Wednesday, August 23rd edition of RealAg Radio talk about the supply and demand report.