In Saskatchewan, Canada’s top spring wheat and canola province, spring wheat was rated 25% good or excellent as of July 12, down from 77% a month earlier. Just 18% of canola was good or excellent, down from 64%.
No. 2 producer Alberta has suffered a similar fate. Spring wheat was 39% good or excellent as of July 13, down from 84% a month earlier, and canola had fallen to 33% from 80%. The two provinces combine for roughly 80% of Canada’s spring wheat and canola output.
These health trends resemble those for U.S. spring wheat, but the U.S. crop started worse. As of Sunday, just 11% of U.S. spring wheat was in good or excellent shape, down from 27% a month earlier and 45% in late May.
Futures markets have responded with Minneapolis wheat this week hitting an 8-1/2-year high for the front-month contract of $9.44-1/2 per bushel. ICE canola hit an all-time high for the November contract last week of C$949 per tonne.
The U.S. Department of Agriculture last week pegged U.S. spring wheat yield down 37% from the previous three-year average, which contained strong but steady results. That put the crop estimate at 345 million bushels, the smallest harvest since 1988, another terrible drought year.
The U.S. durum wheat harvest is expected at 37.2 million bushels, some 46% less than last year and the smallest in 60 years.
However, USDA’s Canadian all-wheat yield is too high for the current situation, sitting about 1% above the three-year average. About 94% of wheat planted in Canada this year is spring or durum wheat, and the latter is in even worse shape.
Canadian wheat yields in 1988 were also among the worst ever, falling 37% below the prior three years amid extreme dryness and heat. If those losses happened this year, Canada’s crop would plunge about 11.7 million tonnes (429 million bushels) from USDA’s latest 31.5 million, not considering any possible acreage abandonment.
Canada planted a lot less canola in 1988 than it does now, but 2012 produced the worst relative yields in recent memory during another hot and dry summer. Canola yield fell about 20% from average levels that year, and if the same occurred this year it would remove at least 4 million tonnes from USDA’s current 20.2 million.
The loss in wheat and canola production is significant for the export market as about half Canada’s canola crop and about three-fourths of its wheat is exported annually. The country accounts for two-thirds of global canola exports and it is the No. 3 wheat exporter, making up about 13% of trade.
China’s demand for Canadian wheat in the first nine months of the current marketing year was more than double the three-year average. China was the top recipient of the grain, accounting for 12%. Indonesia and Peru were also big players at 8% each.
China blocked Canada’s two largest canola handlers two years ago over alleged pest concerns, but exports to China have still rebounded versus last year. Between August and December 2020, China accounted for 23% of Canada’s canola shipments, behind only the European Union due to crop shortfalls there. Japan is another prominent canola customer.
China’s import needs for canola and wheat pale in comparison to that for soybeans, for example, but it still sits among the top importers. Despite losses in Canada, China does have an alternative route in Australia.
Trade relations between the two countries soured last year when Canberra announced plans to investigate COVID-19 origins, prompting Beijing to launch steep tariffs on Australian goods. The 80.5% tariff on barley was so severe that it basically cut off that trade, but China has been increasing wheat and canola imports from Australia.
Australia is the No. 2 exporter of canola and is No. 5 in wheat, and the country’s production levels recently recovered after a string of drought-damaged harvests. The extra Australian supply is key, especially in the Chinese market, but the expected losses out of Canada could be historic.
Canada does not have an excess of canola in reserves, either, as stocks of the oilseed at the end of 2020 were down 24% on the year, hitting an eight-year low for the date. All wheat stocks on Dec. 31 had fallen 4% on the year, reaching a three-year low.
(Editing by Marguerita Choy) ((firstname.lastname@example.org; Twitter: @kannbwx))