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Canada Grain Outlook

10 March 202111 min reading
Canada grain

Agriculture continues to be a strong driver of Canada’s economy. Canada is the world’s fifth-largest exporter of agricultural and agri-food products. It is one of the largest producers of high-quality grain and oilseed crops in the world. In the 2019/20 season, it delivered over 44-million tonnes of grain to export markets. Agriculture and Agri-Food Canada forecasts 115.9 million tonnes of field crop production for the 2020-2021 season.

Canada is the largest country in the western hemisphere and one of the largest in the world. Located in the northern part of North America, Canada extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean. Canada has a population of 37.9 million, with a population density of 4 people/km2, among the lowest in the world.

North American country serves as a global model for stability, sustainable prosperity, and economic inclusion. It is one of the world's wealthiest nations, due to its wealth of natural resources; forests, minerals and fossil fuels. The Canadian economy is large and diversified, with a national GDP of more than $1.6 trillion. Canada has a thriving free-market economy, with businesses ranging from small owner-managed enterprises to multinational corporations. Canada's economic development was historically based on the export of agricultural staples, especially grain, and on the production and export of natural resource products, such as minerals, oil and gas, and forest products.

Although natural resource-based industries, such as mining, agriculture, forestry and fishing make up only a small percentage of GDP at the national scale, they remain a key component of Canada's economy. These industries are still major contributors to foreign trade and the basis of Canadian wealth.

According to the Conference Board of Canada’s two-year economic outlook released in January, real gross domestic product (GDP) will grow 5.3 percent in 2021 and 3.5 percent in 2022 respectively. The growth forecasts for the next two years follow an estimated economic contraction of 5.3 percent in 2020, one of the deepest recessions in modern times. The strength of Canada’s economic recovery will largely depend on the successful distribution of vaccines against COVID-19.

Agriculture and food processing are key components of the economy. Agriculture and food account for 11% of Canada’s goods GDP and almost 10% of Canada’s total merchandise trade. Food processing is by far the largest manufacturing employer in Canada supporting over 250,000 jobs across the country.

Canada grain

Canada is the fifth largest exporter of agricultural and agri-food products in the world after the EU, U.S., Brazil, and China. It exports $56 billion a year in agriculture and agri-food products. It exports half of its beef/cattle, 70% of its soybeans, 75% of its wheat, 90% of its canola and 95% of its pulses.

Canada is one of the largest producers of high-quality grain and oilseed crops in the world. Canada’s main crops are wheat, barley, corn, potatoes, soybeans, rice, canola and sugar beets. Canada is world’s top producer and exporter of canola. Canada’s largest crop export is wheat. North American country produces on average about 30 million tonnes of wheat each year. It is also a world leader in the production and export of pulse crops – peas, lentils, beans and chickpeas. It exports its pulses to over 120 countries.

Canada is investing in important infrastructure and supply chain improvements to meet global customer needs in a reliable and future-oriented way. Ten years ago, Canada exported approximately 33-million tonnes of grain. Advancing to the 2019/20 crop year, over 44-million tonnes was delivered to export markets.

Wheat production

Canada’s effective national pandemic response has helped its food and agriculture industries settle into a relatively stable ‘new normal’ operating environment, despite acute disruptions early in the COVID-19 era. Canadian food and agricultural industries appear to have avoided many of the dire predictions made in the spring of 2020. Increased demand for flour and pasta during the pandemic has sustained prices for Canadian hard red spring wheat varieties as well as durum, while lower demand for and production of ethanol has limited corn deliveries and created cash flow challenges for Canadian corn producers. Barley producers’ have faced similar challenges as beer consumption has fallen further due to disruptions across the foodservice sector during COVID.

According to Agriculture and Agri-Food Canada’s (AAFC) latest report released on 17 February, the total field crop supply in the country for the 2020-2021 season is forecast to increase to 115.9 million tonnes (mt) based on record crop production. Total carry-out stocks are forecast to decrease to 11.8 mt, as exports are expected to remain strong and increase by 11%.

For 2021-2022 season, the area seeded to field crops is forecast to increase marginally, with the area seeded to coarse grains, oilseeds and pulses expected to increase, while the wheat (excluding durum) area is expected to decrease. Production of grains, oilseeds and pulse and special crops are forecast to decrease slightly due to a return to trend yields, resulting in expected total field crop production decreasing to 97.1 mt.

WHEAT SECTOR IN CANADA

Canada’s wheat sector is at the heart of Canadian agriculture. Wheat production has a gross farm value of $7 billion annually. Grown on 9.7 million hectares which produce an average of 32 million tonnes, it is Canada’s largest acreage field crop. Every year, Canada exports between 20-24 million tonnes of wheat to more than 60 countries, with an additional 8-10 million tonnes used domestically for food, animal feed, and industrial uses.

Wheat acreage in Canada has declined by about 10% over the last 20 years due largely to global surpluses of wheat, reduced world prices for high-quality wheat and declining farm profitability for wheat in comparison with other crop options. However, there has been a substantial improvement in wheat yield over time, from an average of 2.2 t/ha in the mid-1990s to an average of 3.4 t/ha between 2016-2019 due to a combination of genetic improvements and agronomic practices.

Canadian wheat is known on the world stage for its high-quality parameters and cleanliness. Approximately three-quarters of Canadian wheat is exported to key markets such as Japan, South East Asia, Central and South America and the United States and emerging markets such as South America, West Africa, Southeast Asia and the Middle East have a growing capacity to become regular customers.

DURUM PRODUCTION

For 2020-2021 season, Statistics Canada is reporting durum production at 6.57 mt, a +31% change year over year thanks to an increase in seeded area (+16%), harvested area (+21%) and a 9% increase in yields to 2.86 t/ha, the second-highest on record since 2016-2017. Total supply is estimated at 7.3 Mt, 6% more than last year and 2% more than the last five-year average. Thanks to strong international demand, in particular from Europe and North Africa, exports of durum continue to move briskly, with volumes in January outpacing 2019/2020 volumes by 15%. Forecasted exports for 2020-2021 were raised slightly from the January report to 5.45 Mt, a record high if realized.

SECOND-HIGHEST WHEAT PRODUCTION

For 2020-2021, the total supply of Canadian wheat (excluding durum) is forecast at 33.5 Mt. According to Statistics Canada, 2020-21 wheat production is reported at 28.6 Mt, the second-highest on record since 2013-2014 and 14% greater than the last five-year average.

Exports are forecast at 21 mt, 10% more than the previous year and 18% more than the last five-year average, underpinned by continued strong demand from China. Domestic use is revised up to 7.6 mt on higher food use, while carry-out stocks are revised downward to 5.0 Mt.

For 2021-2022, the seeded area is revised downward to 7.5 million hectares, as competition for land increases with ongoing strength in the prices for most crops expected to continue through 2021. Assuming average yields, production is projected to decrease 8% year over year, for a total supply of 31.5 mt. Exports are revised downward to 19 mt on uncertainty surrounding China maintaining its current aggressive purchasing behavior.

FOURTH-LARGEST BARLEY PRODUCER

In Canada, 23,000 farmers produce roughly eight million tonnes of barley annually. Canadian barley is primarily used as feed for livestock, and malt for the beer industry. Canada is the fourth-largest barley producer and the second-largest malt exporter in the world. Annually, $1 billion is directly generated from the export of feed barley and malt. Globally the demand for Canadian barley and barley value-added products continues to grow.

Canada grain

For 2020-21, the total barley supply in Canada reached a ten-year high at 11.8 mt, due to good production, despite low carry-in stocks. Statistics Canada (STC) reported that total exports of barley for the August-December 2020 period increased by 45% compared to the same period a year ago, including a 62% rise in raw barley grain exports and a 5% drop in barley product exports. For the entire crop year, total exports are expected to be 3.6 mt, 18% higher than last year and the highest level since 2008.

For 2021-22 season, the area seeded to barley in the country is forecast to increase by 4% to 3.2 million hectares, as a result of good prices and historically low carry-in stocks. Harvest area is projected to be up by 1% and yields to be down by 3%, using the previous five-year averages, which leads to a 1% decrease in the production forecast. Supply is forecast to drop by 3% from the previous year to 11.4 mt, but still reach the second-highest level since 2010. Domestic use is anticipated to drop on lower feed use.

Exports are expected to be lower than the level of the previous year, but still strong, as purchases by Canada’s major barley importers are anticipated to remain strong. In addition, an abundant domestic supply is also supportive for exports. Carry-out stocks are forecast to rise on ample supply and reduced exports and domestic use.

DECREASE IN CORN AREA

For 2020-21, total corn supply in Canada is expected to increase by 1% from last year to 17.8 mt, the third-highest level on record, which is a mixed result of a sharp increase in carry-in stocks, a slight increase in production and a decrease in expected imports.

Statistics Canada reported that corn imports for the September-December 2020 period decreased by 4% from the same period in 2019, while exports increased almost four-fold, but were still lower than the export levels attained in 2018 and 2017. For the entire crop year, corn imports are expected to be lower than last crop year at 1.7 mt due to good domestic feed grain supplies. Canadian corn exports are expected to increase to 1.4 mt, versus 677 thousand tonnes last year, largely due to the anticipated increase in exports to the EU.

For 2021-22, the area seeded to corn in the country is forecast to decrease by 3% from 2019-20 to 1.4 million hectares, as some corn area is forecast to shift to oilseeds. Production is forecast to decrease by 2% to 13.3 mt on forecasts for lower harvested area, and imports are expected to increase accordingly. Supply is projected to drop by 2% from 2020-21, mainly due to lower carry-in stocks and production. Exports are projected to remain stable.

SOYBEANS EXPORTS

For 2020-2021, domestic supplies of soybeans are estimated up 4% from last year to 7.4 mt, versus 7.1 mt last year, as a result of a marginal increase in carry-in stocks and a 3%, or 0.2 mt, increase in production.

Canadian exports of soybeans are estimated up by 23%, to 4.4 mt for the current crop year, on combined strong world demand and higher domestic supplies. Domestic processing of soybeans is forecast to increase by 9% from last year to a historically normal 1.9 mt, on strong crush margins and strong demand for vegetable oils and protein meal.

The factors to watch for the rest of the crop year are: 1. strength of Chinese buying, 2. South American production, 3. Brazilian shipping pace, 4. possible US imports of Brazilian soybeans and 5. US planting intentions for 2021-22.

For 2021-2022, planted area in Canada is forecast to rise by 12% to 2.3 million hectares, on support from high prices with area gains limited by concerns over low subsoil moisture, the short growing season in western Canada and attractive prices for competing crops. Assuming 5-year average yields, production is forecast at 6.6 mt, versus 6.4 mt in 2020-21 and 6.1 mt grown in 2019-2020.

Total supply is forecast to increase to 7.6 mt as the rise in production and slightly higher imports more than offset lower carry-in. Exports are forecast to increase by 14% to 5.0 mt, with shipments headed to a diverse group of countries. Domestic processing is forecast stable at 1.9 mt.

SOURCE: Agriculture and Agri-Food Canada Canadian Grain Commission Canada Grains Council

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