Canada: Discrepancy shows up in wheat ending stock estimates

There is a big discrepancy between Agriculture Canada and the U.S. Department of Agriculture regarding Canada’s estimated 2022-23 wheat ending stocks.

Agriculture Canada is forecasting 6.2 million tonnes of all wheat ending stocks, while the USDA is substantially lower at 4.17 million tonnes.

That is a critically important difference because ending stocks are highly correlated with price.

MarketsFarm analyst Bruce Burnett said part of the variance can be explained by methodology.

Agriculture Canada uses the Canadian crop year that spans from July 1, 2022, to August 31, 2023. The USDA is using the international crop year that runs from June 1, 2022, through May 31, 2023.

But that means the USDA’s ending stocks number should be bigger than Agriculture Canada’s because the Agriculture Canada number includes two more months of exports.

If stocks are indeed at 4.17 million tonnes on May 31, 2023, as the USDA is suggesting, then Agriculture Canada’s number should be even lower after subtracting June and July exports.

“That means we’re going to be extremely tight by the end of July if we have a reasonable export program during those two months,” said Burnett.

The USDA’s forecast would be the second lowest Canadian wheat ending stocks since 1960, according to Index Mundi. That’s as far back as its chart goes. The only lower number was last year’s 3.67 million tonnes.

Burnett suspects the USDA needed strong exports out of Canada to balance the global wheat balance sheet, with exports declining in Argentina.

“The USDA is looking for exports and they’re finding them in Canada,” he said.

It is forecasting 26 million tonnes of Canadian exports, well above Agriculture Canada’s estimate of 23.3 million tonnes.

That would be particularly challenging considering shipments during the first quarter of the international crop year in June, July and August were dismal because of dwindling supplies.

“To make 26 million tonnes we would really have to knock the lights out on our exports for the remaining three-quarters of the international crop year,” said Burnett.

Canada’s wheat sales have been brisk, with 4.63 million tonnes shipped through week 13 of the Canadian crop year. That is a 41 percent improvement over the same time last year.

That is a good clip, but not enough to meet the USDA’s lofty target, said Burnett.

The USDA said global wheat prices have declined in most markets since the October World Agricultural Supply and Demand Estimates report.

“Despite strong import demand and tender activity from the Middle East and North Africa offering support, concerns of a global recession causing a slowdown in demand have driven prices lower,” the USDA said in its latest Grain: World Markets and Trade report.

U.S. price quotes experienced the biggest monthly decline of US$26 per tonne. That compares to a $13 per tonne drop for Canadian quotes. Australian quotes were up $20 per tonne based on strong demand from Asia.

The USDA says widespread favourable growing conditions in Australia and a better-than-expected harvest in Kazakhstan are helping offset lower production from Argentina.

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