October 3, 2011

Canada's 2011 canola and wheat production prospects turned upbeat after mid-summer, as ideal late-season conditions allowed farmers to reap much-improved crops over last year.

Serious flooding in parts of Manitoba and Saskatchewan kept millions of acres fallow for a second straight year, while intense heat during canola's vulnerable flowering stage in July dimmed production prospects initially.

But warm, dry weather on the Canadian Prairies in late summer allowed immature crops to ripen, producing better-than-expected yields for wheat and canola, said Ron Frost, analyst at Frost Forecast Consulting in Calgary, Alberta.

Canola production will hit a record-high 13.8 million tonnes, according to the average trade estimate, up one million tonnes from last year and 600,000 tonnes greater than Statistics Canada (Statscan)'s previous estimate, which was based on a mid-summer farmer survey.

Larger canola production may result in bearishly large ending stocks, given sluggish demand by crushers and exporters in the early months of the 2011/12 crop year, said Jerry Klassen, manager of the Winnipeg officer of GAP SA Grains and Produits.

Much of the expectation for bigger canola supplies is built into current prices, but if Statscan surprises the trade with an even bigger than expected crop number, ICE Canada's canola futures are likely to come under pressure, Klassen said.

Meanwhile, all-wheat production will reach 24.4 million tonnes, up about 300,000 tonnes from Statscan's last estimate and 1.2 million tonnes greater than last year's weather-challenged harvest.

Outside of flooded southeastern Manitoba and southwestern Saskatchewan, where farmers left many fields unplanted, ample spring rains made for impressive wheat and canola yields, Klassen said.

Bigger supplies of Canadian wheat, not including durum, may mean Canada's exports will be higher than average this crop year, he said, although in the global picture those will be somewhat offset by tight US supplies.

North American durum supplies will remain thin, despite improving Canadian prospects, because of flooding this year in the US northern Plains, Klassen added.