Canada’s crop exports are forecast to drop 39 percent this year, leaving importers to look for products from other suppliers.
According to Agriculture Canada, total exports of grains, oilseeds, pulses and special crops are expected to reach 36 million tonnes, up from 59 million tonnes last year.
It would be the smallest export program since 2006-2007, when Canada shipped 35.9 million tonnes.
Production of all crops is expected to fall by 27 million tonnes due to the drought.
This matches the satellite yield and production forecast for a 25 million tonne drop released by Statistics Canada four days after the Ag Canada outlook.
Saskatchewan farm groups are calling on members of the Western Grain Elevator Association to eliminate administration fees and reduce penalties for the 2021-2022 growing season.
“The yields of many farmers on the Prairies will be well below their crop insurance coverage and they will be unable to deliver even modest grain contracts,” the groups said in a joint press release.
Farmers are not the only ones worried about the short harvest.
Jim Everson, president of the Canola Council of Canada, said exports are likely to gain the upper hand this year. This must worry importers.
Agriculture Canada is forecasting seven million tonnes of canola exports, up from 10.9 million tonnes last year.
Everson said Japan, the United States, China and Mexico would take the lion’s share of Canada’s greatly reduced export program.
“They will continue to be the primary markets for canola in an environment where we don’t have the kind of supply we had in previous years,” he said.
Other customers will seek other suppliers or be forced to substitute competing oilseeds.
Everson believes the domestic grinding should fare much better than the export side of the business.
Canola oil prices are sky-high due to strong demand from the recovering restaurant sector and the biofuel industry. This means attractive crush margins.
“We expect the treatment to be robust until next year,” he said.
The US Department of Agriculture is forecasting 9.5 million tonnes of Canadian canola crush, up from 10.4 million tonnes last year. Agriculture Canada is less optimistic and forecasts eight million tonnes.
Dorab Mistry, director of Godrej International, said the canola situation could be much worse than the yield and production figures indicate, as he has heard from his contacts with the Canadian industry that the oil content is also lamentable.
“It’s really a concern,” he said during a presentation at a conference hosted by the US Soybean Export Council.
“Lack of precipitation and high temperatures have reduced the oil content of canola seeds this year. “
Agriculture Canada has set exports of wheat, durum and barley at 17.2 million tonnes, which would be about half of last year’s program for these three crops.
Daniel Ramage, director of market access and trade policy at Cereals Canada, warned that the jury still did not know what the size of the crop would be.
“It is still early in the harvest,” he said.
Ramage noted that the USDA forecasts 24 million tonnes of Canadian production of all wheat, while the International Grains Council uses 24.5 million tonnes.
These estimates greatly exceed Statistics Canada’s 22.95 million tonnes and Agriculture Canada’s 20.2 million tonnes.
Trade has mixed opinions on Agriculture Canada’s issue.
“Some people in the business are more optimistic. Some think this is close to reality. There is a range of opinions, ”he said.
Customers have many alternatives for sourcing wheat, but there are issues elsewhere in the world as well.
SovEcon now forecasts 33.9 million tonnes of Russian exports, up from 38.5 million tonnes last year. Kazakhstan also faces a short harvest. And US spring wheat yields are expected to drop 37 percent.
Canada’s pea exports are forecast to drop to 2.45 million tonnes from 3.65 million tonnes last year. Lentil shipments are expected to reach two million tonnes, compared to 2.4 million tonnes.
Mac Ross, director of market access and trade policy at Pulse Canada, said Agriculture Canada and Statistics Canada production estimates are generally lower than many analysts expected.
But he has no doubts that exports will be down from last year.
This could be a big problem for foreign buyers as Canada is a major player in the pulse markets.
For example, Canada holds 95 percent of China’s pea imports. China could be forced to grant access to competitors like Russia and Ukraine.
Meanwhile, red lentil prices continue to rise in markets like India and Turkey, both of which have short harvests. India recently reduced its import tariffs on lentils.
These markets may have to look to Australia, but Australia is expected to harvest 588,000 tonnes of lentils, down seven percent from last year. Private forecasters believe it will be more important than that.
The only potential benefit of moving a smaller crop is that there should be less logistical headaches for shippers.
It’s in an ideal world. But today’s transportation system is less than ideal due to a container crisis holding many shippers of pulses and special crops hostage, Ross said.
“This has more than anything been the biggest thorn in our side,” he said.