October 4, 2012 / 3:25 PM / 5 years ago

UPDATE 3-Canada canola crop slumps; wheat estimate slips

* Canola output seen at 13.36 mln T; previous view 15.4 mln
    * All-wheat harvest seen at 26.7 mln T; previous view 27 mln

    By Rod Nickel
    WINNIPEG, Manitoba, Oct 4 (Reuters) - Canada's canola
harvest was much smaller than farmers expected and well below
last year's production, Statistics Canada said on Thursday,
setting up a tug of war for supplies from the world's biggest
producer and shipper of the oilseed.
    All-wheat output appears slightly lower than previously
forecast, StatsCan said.
    Canola production will be 13.36 million tonnes in 2012/13,
down 2 million tonnes from the government agency's Aug. 22
estimate of 15.4 million tonnes and below last year's harvest of
14.5 million tonnes.
    The trade was anticipating a lower estimate, but the new
figure was more than 1 million tonnes below the average
    ICE Canada November canola futures shot up 3 percent
after the report, before paring those gains.
    "(The report) is very supportive for canola," said
commodities broker Ken Ball of Union Securities in Winnipeg. "It
is a shock in that it's a low number. We knew the crop was down;
we didn't know if it would show up on this report."
    Midsummer heat during canola's vulnerable flowering period,
disease and a windstorm all reduced the potential of Canada's
crop. The average canola yield fell to 28.2 bushels per acre,
the lowest level in five years. 
    "A crop of that (smaller) size will require some serious
demand rationing to occur," said Dave Reimann, market analyst
with Cargill Ltd's grain marketing services division.
    Canadian canola crushers, such as Cargill,
Richardson International Ltd, Bunge Ltd and Archer
Daniels Midland Co, collectively have processed record
volume for seven straight years, but extending that string may
prove challenging, even with new capacity being added.
    Canola seed importers - such as China, Japan and Mexico -
are faced with either finding oilseed substitutes or paying up
for small, pricey Canadian canola supplies. 
    Still, canola's upside is limited by its "drastically
expensive" price compared with other oilseeds used to produce
vegetable oil, such as palm oil, Ball said.
    Canada, which is also the biggest shipper of spring wheat,
durum and oats, is wrapping up the harvest of most of its crops.
    All-wheat production is estimated at 26.7 million tonnes,
just below the previous estimate of 27 million tonnes but still
well above last year's harvest of 25.3 million tonnes.
    The wheat crop looks to be the biggest in three years and
the third-largest since 1999 - a bright spot for a global wheat
trade concerned about severe drought hitting the Black Sea
    The estimates look neutral for wheat and durum prices,
Reimann said. 
    Average all-wheat yield of 42.1 bushels per acre was
slightly below expectations.
    Traders surveyed by Reuters expected, on average, canola
production of 14.6 million tonnes and an all-wheat harvest of 27
million tonnes. 
    StatsCan surveyed 11,657 farmers Sept. 4-11.
    The oat harvest slipped modestly to 2.9 million tonnes.
    Durum wheat production looks bigger than last year, but just
below expectations at 4.4 million tonnes, while barley output is
also larger than last year at 8.6 million tonnes, but below the
trade view.
    Canada is a minor producer of corn and soybeans, and some of
those crops have been expected to backfill U.S. supplies, which
were curtailed by severe Midwest drought. 
    The eastern province of Ontario has also suffered dry
conditions, however, and StatsCan trimmed Canada's corn estimate
by 1 percent to 11.6 million tonnes, and soybean production by
almost 3 percent to 4.3 million tonnes.

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