Canada set for big wheat crop; canola view smaller

Wed Aug 22, 2012 10:37am EDT
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By Rod Nickel

WINNIPEG, Manitoba (Reuters) - Canadian farmers are on track to harvest the second-largest wheat crop since 1996, while record canola output will fall short of what traders had expected, Statistics Canada data showed on Wednesday in its first production forecast of the year.

In a report that may offer a degree of relief to global grain markets on edge after a year of severe droughts in the U.S. Midwest, Russia and South America, the agency said all wheat production in the world's seventh-largest grower would rise 6.9 percent to 27 million metric tons, bang on forecasts.

However the country's canola production -- the country's second-largest crop after wheat, which is also in focus as the U.S. soybean harvest shrinks -- has suffered greater than expected damage after mid-summer heat arrived in the western Prairie provinces just as some canola was in its key flowering stage.

With yields damaged by heat, disease, insects and hail, Canada's canola production will reach 15.41 million metric tons in 2012/13, Statscan said. While it's a new record high well above last year's 14.2 million metric tons, the figure is a full 1 million metric tons below the average trade estimate.

"Probably for the first time in several years, guys are going in and having fewer bushels coming out than they thought," said Jonathon Driedger, an analyst at FarmLink Marketing Solutions. Flooding has reduced Canada's crops for the last two years.

"I think there would have been some pessimism and caution (when Statscan surveyed farmers), but I don't think that's unwarranted."

ICE Canada November canola futures gained 1 percent after the report's release, touching a four week high. The harvest is in its early stages in Western Canada, and traders have held a variety of views on the extent of damage to yields.

Canada is the world's biggest canola and rapeseed grower and exporter.   Continued...