CANADA: OUTLOOK FOR PRINCIPAL FIELD CROPS December 18, 2017

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1 CANADA: OUTLOOK FOR PRINCIPAL FIELD CROPS December 18, 2017 Market Analysis Group/Grains and Oilseeds Division Sector Development and Analysis Directorate/Market and Industry Services Branch Director: Steve Lavergne Deputy Director: Fred Oleson This report is an update of Agriculture and Agri-Food Canada s (AAFC) November outlook report for the crop year. For most crops in Canada, the crop year started on August 1 and ends on July 31, although for corn and soybeans, the crop year started on September 1 and ends on August 31. AAFC will begin to focus on the outlook for the crop year in the January 2018 report. For , the outlook incorporates the results of Statistics Canada s November Farm Survey of crop production which was released on December 6, The survey, conducted during October 20 to November 13, covered 26,800 Canadian farms. Farmers from every province were asked to report on their estimated seeded and harvested areas, yield and production of grains and oilseeds (G&O) and pulses and special crops (P&SC). These are the final production estimates for 2017 and replace the model-based estimates which were reported by Statistic s Canada in September and by AAFC in the October and November Field Crop reports. The growing season in 2017 was marked by dry conditions in parts of Western Canada and excess precipitation in some regions of Eastern Canada. However, average yields were generally better-than expected and, for many crops, the quality of the crop is well-above the quality of last year s crop. Averaged over all commodities, yields are estimated to be about 5 percent higher than the model-based estimates but 5 percent lower than the average yields recorded for Canadian farmers increased the production of canola, soybeans, oats and corn in 2017 but decreased the production of wheat and barley compared to The production of all field crops is estimated at 93.1 million tonnes (Mt), significantly higher than the model-based estimate of 88.6 Mt but similar to the 93 Mt produced in The production of G&O increased slightly from last year but the production of P&SC decreased significantly due to lower output of peas and lentils. In total, for all field crops, carry-out stocks are expected to increase to 15.7 Mt which is about a million tonnes higher than the level. Compared to the previous crop year, average prices for field crops in Canada for are expected to be pressured by the relative strength of the Canadian dollar. Canada: Principal Field Crops Supply and Disposition Carry-in Stocks Area Seeded Area Harvested Yield Production Imports Total Supply Exports Total Domestic Use Carry-out Stocks ---- thousand hectares ---- t/ha thousand tonnes Total Grains And Oilseeds ,565 26,594 25, ,966 1,951 94,481 42,745 39,145 12, ,591 25,651 24, ,220 1,704 98,515 42,199 42,432 13, f 13,883 27,142 26, ,746 1, ,070 46,068 41,217 13,785 Total Pulse And Special Crops ,284 3,592 3, , ,857 5,555 1, ,609 4, , ,446 7,138 1, f 838 3,927 3, , ,510 5,237 1,318 1,955 All Principal Field Crops ,849 30,186 29, ,390 2, ,338 48,300 41,115 12, ,924 30,260 28, ,047 1, ,961 49,337 43,901 14, f 14,722 31,069 30, ,148 1, ,580 51,305 42,535 15,740 Source: Statistics Canada (STC), f: forecast by AAFC except for area, yield and production for which are STC. Page 1 of 10

2 All Wheat Durum For , production fell by 36% from to 4.96 million tonnes (Mt) as the 16% decrease in seeded area was compounded by lower than trend yields, according to Statistics Canada. The decreased yields resulted from lower than normal precipitation in the durum growing areas. Production by province, with production in brackets: Saskatchewan 3,879 thousand tonnes (kt) (6,178 kt) and Alberta 1,083 kt (1,584 kt). The average grade quality of the durum crop was much better than for , when the quality was reduced by wet weather during harvest, and is better than the past ten-year average. The average protein content was higher than for and for the past ten-year average. Supply decreased by 23% as higher carry-in stocks partly offset the fall in production. Exports are forecast to rise by 6% to 4.8 Mt because of the high quality of the Canadian durum and stronger demand from the US. Feed, waste and dockage is expected to fall sharply due to the lower supply and better quality of the crop. Carry-out stocks are forecast to fall by 57% to 1.1 Mt, 19% lower than the past five-year average of 1.36 Mt. The domestic use, exports and carry-out stocks forecasts are higher than in the November report because Statistics Canada increased the production estimate. World durum production decreased by 3.3 Mt from to 36.6 Mt, while supply fell by 3.2 Mt to 45.9 Mt, according to the International Grains Council. Use is expected to decrease by 2 Mt to 37.7 Mt, as higher food use is more than offset by lower feed use. Carry-out stocks are forecast to fall by 1.1 Mt to 8.3 Mt. Durum production in the US fell to 1.49 Mt from 2.83 Mt for due to a 20% decrease in seeded area and lower yields resulting from drought in the spring durum growing areas. The average Canadian crop year producer price for durum is forecast to fall from as support from the lower world, Canadian and US durum supply is more than offset by the better average quality of the Canadian durum crop and the stronger Canadian dollar. Wheat (excluding durum) For , production of wheat increased by 4% to 25 Mt due to the 1.5% increase in seeded area and lower abandonment, according to Statistics Canada. The abandonment rate was exceptionally low and was much lower than the rate which was high because of wet weather during harvest. Production by province, with production in brackets: Saskatchewan 9,021 kt (8,371 kt), Alberta 8,897 kt (8,314 kt), Manitoba 4,368 kt (4,217 kt), Ontario 2,300 kt (2,542 kt), Quebec 295 kt (310 kt), and other provinces 141 kt (213 kt). Production by class of wheat, with production in brackets: winter (hard red, soft red and soft white) 2,855 kt (3,513 kt), Canada Western (Hard) Red Spring (CWRS) 19,198 (16,669 kt), Canada Eastern (Hard) Red Spring 405 kt (434 kt), Canada Prairie Spring 1,235 kt (1,720 kt), Canada Western Extra Strong 203 kt (278 kt), Canada Western Soft White Spring 681 kt (895 kt) and other spring wheat (Canada Northern Hard Red and Canada Western Special Purpose) 445 kt (457 kt). Production of the premium quality CWRS wheat accounted for 77% of total wheat production, compared to 70% for The average grade quality of the CWRS wheat crop was much better than for , when the quality was reduced by wet weather during harvest, and was better than the past ten-year average. The average protein content was lower than for and for the past ten-year average. The average grade quality of the other classes of wheat produced in Western Canada was better than for The average grade quality of the wheat produced in Eastern Canada was good in both 2017 and Supply rose by 7% as higher carry-in stocks compounded the rise in production. Exports are forecast to increase by 10% to 17.2 Mt because of Page 2 of 10

3 increased supply of high quality hard red spring wheat and strong demand for that class of wheat in world markets, especially from the US. Domestic food use is forecast to increase slightly to 2.6 Mt while industrial use decreases slightly to 0.7 Mt. Feed, waste and dockage is expected to increase from Carry-out stocks are forecast to rise marginally to 5 Mt, 10% lower than the past five-year average of 5.57 Mt. The domestic use, exports and carry-out stocks forecasts are higher than in the November report because of the increased production estimate from Statistics Canada. World all wheat (including durum) production increased by 1 Mt to 755 Mt, according to USDA. Supply grew by 16 Mt to 1,011 Mt due to the higher production and higher carry-in stocks. Total use is forecast to increase by 2 Mt to 742 Mt, as higher food use is mostly offset by lower feed use. Carry-out stocks are forecast to rise by 13 Mt to 268 Mt. However, China accounts for 128 Mt of the stocks, an increase of 17 Mt from Wheat stocks in China are generally not exported. Excluding China, world all wheat carry-out stocks are forecast to fall to 141 Mt from 144 Mt for All wheat production in the US decreased by 15.4 Mt to 47.4 Mt, according to USDA, as lower seeded area was compounded by higher abandonment and lower yields. By class, production fell by 31% to Mt for hard red winter wheat, 22% to Mt for hard red spring wheat, 15% to 7.95 Mt for soft red winter wheat and 10% to 7.03 Mt for white wheat. Supply decreased by 9 Mt to 83.6 Mt. Domestic use is forecast to fall by 0.8 Mt and exports are forecast to decrease by 2.2 Mt. Carry-out stocks are forecast to decrease by 6 Mt to 26.1 Mt. Canadian wheat prices are forecast to be similar to as pressure from the higher world and Canadian supply and the stronger Canadian dollar is offset by support from the lower US supply and strong demand for high protein wheat. There is strong demand for high protein wheat because of lower average protein content for US hard red winter wheat and for Canadian hard red spring wheat. For , Canadian winter wheat area, seeded in the fall of 2017, decreased to 556,600 hectares (ha) from 625,200 ha seeded the previous year. For Eastern Canada, the seeded area rose to 421,100 ha from 408,700 ha and for Western Canada, the area fell to 135,500 ha from 216,500 ha. Stan Skrypetz: Wheat Analyst stan.skrypetz@agr.gc.ca Page 3 of 10

4 Coarse Grains Barley For , production decreased by 10% to a near-record low of 7.9 Mt due to lower area and a lower average yield. Although carry-in stocks are at a seven-year high, supply decreased by 1% to 10.2 Mt due to lower production. Domestic use is forecast to increase by 5% due to higher feed and industrial use. Total barley exports are forecast to increase by 5% due to lower world supplies. Barley carry-out stocks are forecast to decrease by 27% to 1.6 Mt but remain above the previous five-year average. The Lethbridge in-store feed barley price is forecast to increase due to the tight total barley supplies and the decline in the availability of other domestic feed grain substitutes. The average barley yield was 3.73 tonnes/hectare (t/ha) which is, despite the dry conditions on the Western Prairies, the third highest average yield on record. Barley yields in Eastern Canada were slightly below last crop year and the previous three-year average. Yields were better in the Maritime Provinces but Ontario and Quebec were below average. Despite the less than ideal weather conditions on the Western Prairies this crop year, yields were better-than expected but below the record of This said, Manitoba had an excellent year and achieved a record average yield which was 10% higher than 2016 and 26% higher than the previous 10-year average. In terms of total barley production, Saskatchewan closed the gap on Alberta. Saskatchewan is the only prairie province which is consistently increasing its production which is about 11% higher than its previous three and five-year averages. Alberta s yield and production decreased by 7% and 11%, respectively. Production continues to contract as it was 9% below the previous three-year average but 16% below the 10-year average. For 2016 and 2017, the volume and quality of the crop turned out to be better-than expected, given the harvest and growing conditions on the western half of the Prairies. This crop year, the Lethbridge barley prices have been moving higher in a step-wise fashion. Prices increased and then hit a stable plateau before moving higher again. Since mid-august, higher feeder and slaughter cattle US futures prices have helped provide feed grain price support. Lethbridge barley prices stabilized, after the latest jump, at about $220/tonne. Provincial feed barley basis levels are varying across the three Prairie provinces with Alberta narrower than average, Manitoba wider than average and Saskatchewan close to its previous five-year average. In Western Canada, the average spot premium for the crop year to-date for malting barley relative to feed barley has been about $40/tonne which is near the previous five-year average. Since 2014 China has become the dominant export destination for Canadian barley and, based on export values, most of it is exported as malt barley. There continues to be strong competition for this market specifically from Australia and Ukraine. In November, China lifted an export ban on two Australian companies that was in place from September 2015 due to snail contamination. World feed barley prices have remained flat against near- to-unchanged world corn prices and overall trade is expected to decline for a second year. World malt barley prices have strengthened with Australian malt prices showing the largest increase as their barley output declines from last year s record levels. Corn For , production increased by 7% to 14.1 Mt, the second highest on record due to near-record seeded and harvested areas and an above average total yield. Imports, mainly from the US, are forecast to decrease by 13% due to the higher supply in Canada. Total supply is forecast to increase by 4% to a record of 17.1 Mt. Total domestic use is forecast to increase by 2% due to trend increases in feeding, ethanol production and other industrial use such as starch. Exports are forecast to increase by 15% due to the higher Canadian total supply, lower world corn supply and continuing good demand from the Page 4 of 10

5 western EU region. Carry-out stocks are forecast to increase by 14% to a record level of 2.5 Mt. The nearby Chatham corn price is forecast to remain similar to last year as slightly higher US corn futures prices are offset by a stronger Canadian dollar. As with 2015 and 2016 crops, Canada s 2017 corn crop was better-than expected and produced a near-record yield of t/ha. Eastern Canada suffered from a slow start and cool conditions during the summer but fall conditions were good. Similar to barley, the Maritimes achieved the best yields compared to previous averages. Corn production continues to increase on the Prairie Provinces as seeded area increased 27% from 2016 and production was 15% higher. In Manitoba, area seeded to corn was 65% higher than the 10-year average. Alberta is also rapidly expanding its area and production as both increased 141% from Corn production in Alberta is almost double the average of the previous 10-years. Despite weather troubles, Ontario and Quebec had a good year for corn as the average yield was still 2-3% higher than the previous three-year average and production was about 11% higher than the previous 10-year average. The corn harvest is essentially complete in Eastern Canada and Manitoba and the nearby Chatham corn basis has remained close to the crop year average, despite the large corn crop. By the beginning of December, and with another large US corn crop in the bins, US corn futures prices have drifted lower with harvest pressure seasonality. World corn supplies are similar to last crop year and the lower US dollar has kept a ceiling on price increases. On the bullish side, there continues to be forecasts for a smaller South American corn crop in However, the forecast for large beginning stocks, and only a slight increase in total disappearance, will serve to increase US corn ending stocks for and limit gains on the US corn futures. Despite the large ending stocks, the USDA farm gate price projection for was US$0.10/bu higher than for Oats For , production increased by 17% due to a higher seeded and harvested areas and a record total average yield. The higher production more than offsets lower carry-in stocks and allows total supply to increase by 7%. Total domestic usage is forecast to decrease by 3% due to lower feed use and trend human consumption. Oat grain and product exports to the US are forecast to increase by a total of 3% to the highest level in nine years. Carry-out stocks are forecast to increase 32% to 0.9 Mt due to the higher total supply. The Canadian oat price is forecast to increase due to a higher forecasted US oat futures price and the continuing supportive Canadian dollar. The record average yield on oats of 3.55 tonnes/hectare (t/ha) surpassed the previous record of 3.52 t/ha in In Canada s main oat producing region, the Canadian Prairies, a new record average yield was achieved only in Manitoba with Alberta and Saskatchewan having their second and third highest yield on record, respectively. In 2017, Manitoba produced its largest oat crop in nine years as it was 49% larger than 2016 and 43% higher than the previous five-year average. In Western Canada, good pre-crop pricing contributed to the higher area seeded to oats and, along with good yields, total oat production increased to its highest level in four years which reversed a decline trend. In Eastern Canada, there was a second straight year of lower area seeded and production, after the bumper year of For 2017, seeded area and production declined by 37% and 42%, respectively. Average yields were flat-to-lower, depending on the province, but higher than the previous five or ten-year averages. After a slow start, the pace of Canadian exports of grain increased to exceed the previous five-year average. However, exports of oat products have been consistently higher by nearly 20% to-date. The nearby US oats futures price approached the crop year high in the first half of November but decreased as traders offset long positions. Trading activity in the new crop on the US oat futures contracts has been very limited. The overall quality of this year s oat crop was much better than 2016 and spot oat basis levels on the Canadian Prairies has varied by province with Alberta running wider-than average, Saskatchewan narrower-than average and Manitoba close to its previous five-year average. Page 5 of 10

6 Rye For , production decreased by 22% due to lower area seeded, despite record average yields and a higher-than average rate of abandonment. However, due to sharply higher carry-in stocks, total supply increased by 4% to an 11-year high. Total domestic use is forecast to increase by 3% as feed remains above average. Exports are forecast to decrease due to the continuing large North American total rye supply and trend demand. Carry-out stocks of rye are forecast to increase by 11% to 0.18 Mt. This is a 12-year high and well-above all short and medium term averages. Prices are forecast to increase slightly with the general price increase to prices in the coarse grain complex. Average yields increased to a record of 3.34 tonnes/hectare (t/ha) from the previous record of 3.22 t/ha in New record average yields were achieved in Alberta, Manitoba and Saskatchewan as the fall seeded rye missed the summer s drought-like conditions. Area and production have been steadily increasing in Eastern Canada the past few years. This year was the fourth straight year that the East has increased its rye seeded area, from 18 thousand hectares (kha) in 2013 to nearly 53 kha in 2017, which represented 37% of Canada s total rye area. However, for 2017, average yields in Ontario and Quebec were below average. Canada s exportable supply of rye grain remains at a high level but the pace of exports has been relatively slow. The pace will have to increase substantially to achieve the results from five years ago when 180,000 tonnes were exported when total supplies were about 150,000 tonnes smaller. The Statistics Canada survey provided the first estimate of the area seeded to rye for 2018 at 125,000 hectares. This is a 13% decrease from 2017 but is higher than the previous three to 10-year averages. For 2018, Eastern Canada is expected to seed a record rye crop that would account for nearly half of Canada s rye area at 47%. In some regions of Western Canada, seeding was impeded by the later-than average harvest and very dry soil conditions. Assuming average yields and abandonment, the decrease in area would result in a further decrease in rye production of about 15%. However, due to large carry-in stocks, total supply would decline by only 5-10% and remain above the previous five and ten-year averages. John Pauch: Coarse Grain Analyst john.pauch@agr.gc.ca Page 6 of 10

7 Oilseeds Canola For , production of canola is estimated at a record 21.3 million tonnes (Mt) which is almost 9% higher than the previous record of 19.6 Mt which was set in Both seeded area and harvested area set new records of 9.31 million hectares (Mha) and 9.27 Mha, respectively. Yields declined by about 0.11 tonne per hectares (t/ha) from last year to 2.3 t/ha. The sharp revision in canola production from the model-based estimate of 19.7 Mt is largely due to increased yields in Saskatchewan of 2.18 t/ha versus the model-based estimate of 1.9 t/ha. The estimate for provincial production increased to 11.2 Mt versus the model-based estimate of 9.74 Mt and 10.7 Mt for By contrast, production in Alberta increased to 6.8 Mt versus 6.2 Mt last year while production in Manitoba was 3.2 Mt compared to 2.6 Mt for For the crop year to early December, the Canadian Grain Commission s (CGC) harvest survey of 2,229 samples of canola generated 2,137 samples that graded No.1, 67 samples that graded No.2 and 25 samples that were No.3 grade. The oil content for all samples is averaging 45.0%, which is higher than Canola grades and oil content appear to be marginally better in Manitoba and Saskatchewan compared to Alberta. The CGC cautions that the sample survey may not reflect the actual production distribution of the canola crop. Compared to last year, the supply of canola is forecast to rise by 4%, to a record 22.8 Mt, as low carry-in stocks moderate the increase in production. Producer deliveries into the CGC licensed handling facilities are running about 6% ahead of last year for the crop year to-date. The cumulative crush pace is running marginally behind last year s record setting rate, supporting forecasts for a slight decline in domestic processing for The crushers are operating at about 84% of capacity compared to 88% a year ago. Exports of canola are forecast to increase to 11.5 Mt on an increase in available domestic supplies and steady importer buying. The export pace through Canadian Grain Commission licensed elevators is running 12% ahead of last year s pace for the year to-date. World demand for Canadian canola remains strong despite competition from burdensome world soybean, and soyoil, supplies, increased palm oil production and India s tariff on vegetable oil imports. Looking forward, further revisions to the export estimates for canola are expected to be upwards based on increased domestic supplies and the current export pace. Carry-out stocks are forecast at 2.0 Mt, which will be adequate to satisfy the export and crush requirements between the end of the crop year and start of harvest which usually begins in August and hits full stride by September. Carry-out stocks are expected to be evenly split between commercial and on-farm holdings. Canola prices are expected to increase marginally to a range of $510 to $550/t on support from higher US soyoil prices and the weaker Canadian dollar vis-à-vis the US dollar. Additional support for canola prices is provided by the steady to strong crush and export pace. The price gains will be limited by abundant world vegetable oil and protein meal supplies and by improved growing conditions across South America. The spread or discount of inland elevator bid prices versus port prices for canola is expected to remain near the long run average as support from strong world demand offsets pressure from large oilseed supplies. The main factors to watch include: (1) the strength of crusher and exporter buying, (2) mid-winter weather forecasts and the pace of producer deliveries, primary elevator shipments and terminal elevator receipts and shipments, (3) South American planting and growing conditions, and (4) early seeding indications for Flaxseed (excluding solin) For , area seeded is estimated at 0.42 Mha compared to 0.38 Mha in Yields are estimated at 1.3 t/ha versus 1.7 t/ha for and the five-year average of 1.5 t/ha. Production of flaxseed is estimated to decrease to 0.54 Mt from Page 7 of 10

8 0.59 Mt last year as higher harvested area is more-than offset by lower yields. Total supply is estimated to decrease by 16% from last year, to 0.74 Mt, as the drop in output is complemented by lower carry-in stocks. Exports are forecast to remain stable at 0.5 Mt as the demand for flaxseed is constrained by competition from burdensome world oilseed and vegetable oil supplies. Total domestic use is expected to decline sharply on a significant drop in feed, waste and dockage. Carry-out stocks are forecast to decrease slightly to Mt from 0.19 Mt the year before. Average prices are expected to decline slightly from to a range of $430 to 470/t. Large world vegetable oil stocks, steady production in Kazakhstan and Russia and uncertain export buying are the major factors limiting price gains for Canadian flaxseed prices. Soybeans For , production is estimated at a record 7.7 Mt, up 18% from last year s record of 6.6 Mt. The increase is largely due to the sharp increase in harvested area, to 2.94 Mha, more than 0.73 Mha higher than last year. About 65% of Canada s soybeans are expected to be grown in Eastern Canada and 35% in Western Canada. Soybean yields are estimated at 2.63 t/ha compared to 2.97 t/ha for Total supply is forecast to increase by 12% from last year to 8.3 Mt on higher output which more-than offsets the minor decrease in carry-in stocks and imports. The forecast for domestic crush has been lowered by 0.1 Mt, from last month, to 1.8 Mt. This is marginally lower than last year and below the record set in The revised crush forecast is supported by the slowdown in the crush pace. Canadian oilseed processors are operating at 59% capacity for the year to-date versus 63% last year at this time. Exports are forecast to rise sharply to a record of 5.6 Mt versus 4.5 Mt in and the five-year average of 3.8 Mt. Soybeans are forecast to be the third largest crop exported from Canada after wheat ex-durum and canola with buyers widely dispersed by country. Compared to last year, carry-out stocks are forecast to rise slightly with most held in commercial stocks. Soybean prices are forecast to decrease from last year to a range $410 to $450/t. The price outlook has been pressured by lower US farmgate prices in the soybean complex and the stronger Canadian dollar. The main factors to watch are: (1) the pace of producer deliveries, (2) the Canadian crush and export pace, (3) the US export inspection pace, (4) South American weather and planting conditions, and (5) the strength of Chinese buying. Chris Beckman: Oilseeds Analyst Chris.beckman@agr.gc.ca Page 8 of 10

9 Pulses and Special Crops Dry Peas For , production decreased by 15% to 4.1 million tonnes (Mt) due to lower yields in Saskatchewan and lower harvested area, particularly in Alberta and Manitoba. Yellow and green pea types are expected to account for about 3.6 Mt and 0.4 Mt, respectively, with the remainder spread across other varieties. Supply has decreased by only 12%, to 4.4 Mt, due to higher carry-in stocks. Exports are forecast at 2.4 Mt, largely due to lower imports by India. This is expected to be partly offset by record exports to China. Carry-out stocks are forecast to increase sharply due to the excess exportable supply. The average price is expected to fall from , due to the abundant supply and expectations for record carry-out stocks in During November, the on-farm price of yellow peas and green peas in Saskatchewan fell by $50/t and $20/t, respectively. This was largely due to the 50% duty imposed by the government of India on dry pea imports. For the crop year to-date, green dry pea s prices have been maintaining a premium of over $23/t above yellow dry peas. Last year, green peas were at a $6/t discount to yellow peas. In the US, area seeded to dry peas for is estimated by the USDA to have fallen to 1.2 million acres. This is largely due to a decrease in area in North Dakota. With estimates of below average yields, US dry pea production is estimated by USDA to fall by 45% to 0.7 Mt. US dry peas are expected to compete, on a smaller scale, in Canadian export markets such as China. Lentils For , production decreased by 21% to 2.6 Mt due to lower harvested area. Large green lentil production is estimated to be similar to last year at 0.5 Mt and red lentil production fell to about 1.8 Mt. Production of the other remaining lentil types is estimated to have risen to just over 0.2 Mt. Supply decreased by only 11% due to large carry-in stocks. Exports are forecast to decrease to 2.1 Mt. To-date Turkey, the EU and India are the top export markets. Imports and domestic use are expected to be lower than the previous year due to the above average grade distribution. Carry-out stocks are expected to rise due to the decrease in exports. The overall average price is forecast to fall below the levels achieved in due to weaker world demand, larger domestic carry-out stocks and despite a higher proportion of grade distribution at the No.1 grade. During the month of November, the on-farm price in Saskatchewan for No. 1 grade large green lentils fell by about C$80/t when compared to last month and the price of No. 1 red lentils decreased by over C$70/t. This was largely due to lower export demand. The quality of the Canadian lentil crop is considered to be above average. There was an increase in the supply of No.1 or No.2 grade Canadian lentils for when compared to last year. No.1 large green lentil prices are forecast to maintain a premium of $420/t over No. 1 red lentil prices, versus a record $590/t in In the US, the area seeded to lentils for was forecast by the USDA at 1.1 million acres, up 19% from due to higher area seeded in Montana. With estimates of below average yields, US lentil production is estimated by the USDA to fall to over 0.3 Mt, nearly one-half the level. Dry Beans For , production rose sharply to 322 thousand tonnes (kt), consisting of 92 kt of white pea bean types and 231 kt of colored bean types. Production in Ontario rose, mostly due to higher area and yields for white pea bean types. In Manitoba, production rose due to higher area and yields for colored bean types. In Alberta, colored bean production rose with an increase in area. Supply is expected to rise sharply as lower carry-in stocks are more-than offset by higher production and imports. Exports are forecast to be marginally lower than the previous year. The US and the EU are forecast to remain the main markets for Canadian dry beans, with smaller volumes exported to Mexico and Japan. Carry-out stocks are expected to increase sharply. The average Canadian dry bean price is Page 9 of 10

10 forecast to decrease sharply due to the larger supply in North America. In the US, area seeded to dry beans is estimated by the USDA to have increased to nearly 1.5 million acres, largely due to higher area seeded in North Dakota. US total dry bean production (excluding chickpeas) is estimated by the USDA to rise to 1.2 Mt, up 15% from as a result of higher area. The largest increase came from the black bean and pinto bean classes. US export markets continue to be Canada, EU and Mexico. Chickpeas For , production increased to 92 kt due to higher harvested area, despite significantly lower yields. Crop quality is expected to be average and much better than the previous year. Supply is forecast to increase as lower carry-in stocks are more-than offset by higher imports. Exports are forecast to increase with the US and Pakistan as the main importers. Carry-out stocks are expected to remain tight. The average price for all grades of chickpeas is forecast to rise, for the fourth consecutive year, due to lower world and Canadian stocks. US chickpea area seeded is estimated by the USDA at a record 0.6 million acres, nearly double from Assuming lower yields and higher abandonment, US chickpea production is forecast by AAFC at a record 0.4 Mt, up sharply from the previous year. Mustard Seed For , production was cut in half to 122 kt, due to lower area and yields. Production of all three major types of mustard (yellow, brown and oriental) decreased as a result. Supply, however, decreased by only 16% due to higher carry-in stocks. Exports are expected to be similar to last year at 125 kt. Due to lower supply, carry-out stocks are forecast to fall sharply. The US and the EU are expected to remain the main export markets for Canadian mustard seed. The average price is forecast to rise sharply due to lower Canadian and world carry-out stocks. Canary Seed For , production fell marginally to 137 kt due to lower yields. Harvested area was higher due to a lower rate of abandonment. Exports are expected to be lower than last year. The EU and Mexico are forecast to remain the main export markets, followed by Brazil and the US. The average price is forecast to be lower than the level. Sunflower Seed For , production increased slightly to 58 kt from the previous year as lower area was more-than offset by higher yields. However, supply increased significantly due to large carry-in stocks. Exports are forecast to be similar to last year. Carry-out stocks are forecast to rise due to higher supply. The US is expected to remain Canada s main export market for sunflower seed. The average price is forecast to be higher than due an expected decrease in North American sunflower seed carry-out stocks and higher US soyoil prices. US sunflower seed production is estimated by the USDA at just over 0.8 Mt, down sharply from and largely due to lower production in North Dakota. It is estimated by AAFC that production of oil type varieties and confectionery type varieties fell to 0.7 Mt and about 0.1 Mt, respectively. US supply is forecast by the USDA to fall by nearly 20% to 1.2 Mt. As a result, US imports are expected to rise and domestic use is estimated to fall. US sunflower seed carry-out stocks are expected to fall sharply and provide some support for North American prices. For , the global supply of sunflower seed is estimated by the USDA at 50 Mt. This is marginally lower than the record supply of last year, due to lower production in Ukraine. World exports are expected to decrease by 22% to 1.9 Mt and domestic use is expected to fall marginally to 46 Mt. As a result, world carry-out stocks are expected to fall sharply to 2.0 Mt, the lowest since Bobby Morgan: Pulse and Special Crop Analyst Bobby.Morgan@agr.gc.ca Page 10 of 10

11 CANADA: GRAINS AND OILSEEDS SUPPLY AND DISPOSITION December 18, 2017 Grain and Crop Year (a) Area Seeded Area Harvested Yield Production Imports (b) Total Supply Exports (c) Food & Industrial Use (d) Feed, Waste & Dockage Total Domestic Use (e) Carry-out Stocks thousand ha t/ha thousand tonnes Average Price (g) $/t Durum ,355 2, , ,378 4, , ,505 2, , ,873 4, ,092 2,476 1, f 2,106 2, , ,835 4, , Wheat Except Durum ,445 7, , ,426 17,192 3,309 3,126 7,156 4, ,915 6, , ,144 15,623 3,285 3,536 7,548 4, f 7,020 6, , ,095 17,200 3,300 3,839 7,895 5, All Wheat ,800 9, , ,803 21,706 3,518 3,438 7,919 5, ,420 8, , ,016 20,157 3,465 5,628 10,024 6, f 9,126 8, , ,929 22,000 3,480 4,378 8,829 6,100 Barley ,641 2, , ,604 1, ,809 6,169 1, ,586 2, , ,290 2, ,558 5,846 2, f 2,334 2, , ,163 2, ,818 6,163 1, Corn ,325 1, ,559 1,224 16,185 1,592 5,269 7,068 12,351 2, ,345 1, , ,351 1,301 5,633 7,211 12,863 2, f 1,447 1, , ,082 1,500 5,700 7,363 13,082 2, Oats ,350 1, , ,121 2, , , ,145 2, , f 1,295 1, , ,424 2, , Rye f Mixed Grains f Total Coarse Grains ,537 4, ,594 1,405 30,333 5,919 5,635 13,765 19,749 4, ,371 4, ,751 1,001 31,417 6,070 5,940 13,912 20,196 5, f 5,342 4, , ,306 6,468 6,069 14,286 20,708 5,130 Canola ,363 8, , ,055 10,299 8, ,665 2, ,236 8, , ,786 11,016 9, ,422 1, f 9,307 9, , ,761 11,500 9, ,261 2, Flaxseed , f Soybeans ,230 2, , ,236 4,191 1, , ,240 2, , ,414 4,455 1, , f 2,947 2, , ,326 5,600 1, , Total Oilseeds ,257 11, , ,345 15,120 10, ,477 2, ,861 10, , ,081 15,972 11, ,212 1, f 12,674 12, , ,835 17,600 10, ,680 2,555 Total Grains And Oilseeds ,594 25, ,966 1,951 94,481 42,745 19,391 18,138 39,145 12, ,651 24, ,220 1,704 98,515 42,199 20,428 20,341 42,432 13, f 27,142 26, ,746 1, ,070 46,068 20,449 19,173 41,217 13,785 (a) Crop year is August-July, except corn and soybeans, for which the crop year is September-August. (b) Imports exclude products. (c) Exports include grain products but exclude oilseed products. (d) Food and Industrial use for soybeans is based on data from the Canadian Oilseed Processors Association. (e) Total Domestic Use = Food and Industrial Use + Feed Waste & Dockage + Seed Use + Loss in Handling (g) Crop year average prices: Wheat (No.1 CWRS, 13.5% protein) and Durum (No.1 CWAD, 13% protein), both are average Saskatchewan producer spot prices. Barley (No. 1 feed, cash, I/S Lethbridge), Corn (No.2 CE, cash, I/S Chatham), Oats (US No. 2 Heavy, CBOT nearby futures); Rye (No. 1 CW, cash, I/S Saskatoon); Canola (No. 1 Canada, cash, Track Vancouver); Flaxseed (No. 1 CW, cash, I/S Saskatoon); Soybeans (No. 2 CE, cash, I/S Chatham). Source: Statistics Canada (STC), f: forecast by AAFC except area, yield and production for are STC.

12 CANADA: PULSES AND SPECIAL CROPS SUPPLY AND DISPOSITION December 18, 2017 Grain and Crop Year (a) Area Seeded Area Harvested Yield Production Imports (b) Total Supply Exports (b) Total Domestic Use (c) Carry-out Stocks Stocks-to- Use Ratio thousand ha t/ha thousand tonnes % $//t Average Price (d) Dry Peas ,489 1, , ,900 2,647 1, ,715 1, , ,042 3, f 1,656 1, , ,423 2, , Lentils ,633 1, , ,922 2, ,372 2, , ,420 2, f 1,783 1, , ,029 2, Dry Beans f Chickpeas , f ,200-1,230 Mustard Seed f Canary Seed f Sunflower Seed f Total Pulses and Special Crops (c) ,592 3, , ,857 5,555 1, ,609 4, , ,446 7,138 1, f 3,927 3, , ,510 5,237 1,318 1, (a) Crop year is August-July. Grains Include pulses (dry peas, lentils, dry beans, chick peas) and special crops (mustard seed, canary seed, sunflower seed). (b) Imports and exports exclude products. (c) Total Domestic Use = Food and Industrial Use + Feed Waste & Dockage + Seed Use + Loss in Handling. Total domestic use is calculated residually. (d) Producer price, FOB plant, average over all types, grades and markets. Source: Statistics Canada (STC) and industry consultations. f: forecast, by AAFC except area, yield and production for and area seeded for which are STC.