Required Report - public distribution

**Date:** 2/3/2006

**GAIN Report Number:** CA6001

CA6001

**Canada**

**Grain and Feed**

**Quarterly report**

**2006**

**Approved by:**

![](media/image1.wmf)Lisa Anderson

U.S. Embassy

**Prepared by:**

Christina Patterson

**Report Highlights:**

For 2006/2007, total wheat production is forecast to decline slightly to
26.6 MMT as normal yields are not expected to be sufficient to offset
forecasted increases in total acreage seeded and harvested. Durum
production is forecast to decline to 4.5 MMT, as seeded acreage and
yields decline. Barley production is forecast to increase to 12.8 MMT,
due to an increase in seeded acreage. Corn production is forecast to
decline to 8.8 MMT, due to lower yields. Oat production is forecast to
increase to 3.8 MMT, as seeded acreage increases. Based on the
assumption that the countervailing and anti-dumping duty will remain on
U.S. corn imports, total corn imports for 2006/2007 are forecast to
decline to 1.7 MMT. The duties are expected reduce feed use and
industrial use of corn in Canada, thereby reducing the need to import
corn.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Ottawa \[CA1\]

\[CA\]

Table of Contents

[**QUARTERLY GRAIN AND FEED UPDATE
3**](#quarterly-grain-and-feed-update)

[Total Wheat 3](#total-wheat)

[Durum Wheat 3](#durum-wheat)

[Barley 4](#barley)

[Corn 4](#corn)

[Oats 5](#oats)

[STATISTICAL TABLES 5](#statistical-tables)

[Table 1: Wheat PSD 5](#table-1-wheat-psd)

[Table 2: Durum Wheat PSD 6](#table-2-durum-wheat-psd)

[Table 3: Barley PSD 6](#table-3-barley-psd)

[Table 4: Corn PSD 7](#table-4-corn-psd)

[Table 5: Oat PSD 7](#table-5-oat-psd)

[Recent Reports from FAS/Ottawa: 8](#recent-reports-from-fasottawa)

# QUARTERLY GRAIN AND FEED UPDATE

With the cost of production continuing to climb, producers are looking
towards maximizing their returns by planting crops with lower input
costs. Based on the current crop prices and the fact that cereal crops
generally have lower input costs, acreage for crops like non-durum
wheat, barley and oats are forecast to increase in the 2006/2007 crop
year. Durum wheat will buck the trend, as burdensome world supplies
continue to hurt prices. Corn production is forecast to increase based
on the assumption that the duties on U.S. corn imports will remain in
place (see CA5085).

## Total Wheat

Total Canadian wheat production for 2005/2006 increased by 3.5% to 26.8
million metric tons (MMT), as higher yields offset a decline in
harvested acreage. Increased production in Saskatchewan and Alberta
helped offset the decline in production in Manitoba. Poor harvest
conditions reduced the quality of the wheat crop, with approximately 18%
of the spring wheat crop in Saskatchewan expected to grade No.1. This is
significantly lower than the 10-year average of 53%, but higher than the
6% from the 2004/2005 crop year. The quantity of the overall wheat crop
falling into the top grades was below normal, but higher than in
2004/2005. As a result, there was a larger supply of milling quality
wheat. This is expected to translate into an increase in exports - from
14.9 MMT in 2004/2005 to 16.6 MMT in 2005/2006. Domestic consumption is
expected to increase slightly to 9.3 MMT, as the lower quality wheat is
utilized by the livestock industry. The large carry-in stocks from
2004/2005, combined with the jump in production, are expected to result
in another increase in 2005's ending stocks.

Total Canadian wheat production for 2006/2007 is forecast to decline to
26.6 MMT, despite an increase in acreage, as yields are expected to
return to trend levels. As a result of high carry-in stocks from 2005
and strong production, total wheat supplies are forecast to increase by
approximately 3.0% to 36.1 MMT in 2006. Exports are forecast to increase
to 17.5 MMT as the quality of the 2006 wheat crop is forecast to return
to more normal levels, which will leave more high-quality wheat
available for export. In addition, the expected removal of duties on
Canadian hard red spring wheat exports into the U.S. and the negative
impact of the harsh winter on Russian winter wheat, are expected to
provide additional export opportunities for Canadian wheat producers.
Domestic wheat consumption is also forecast to increase as the use of
wheat in livestock rations is projected to increase slightly. The
increase in exports and the slight increase in domestic consumption are
forecast to help reduce wheat ending stocks slightly in 2006 to 9.1 MMT.

Winter wheat production is forecast to increase across Canada. For the
2006/2007 crop year, Ontario winter wheat seed acreage has increased to
1.1 million acres up from 830,000 acres in 2005. In addition, winter
wheat seed acreage in has also increased in Saskatchewan and Manitoba.
With the tariffs on U.S. corn imports, feed use of winter wheat in
Ontario is expected to increase. Exports of winter wheat from Ontario
are expected to remain relatively unchanged from 2005.

## Durum Wheat

Canadian durum production for 2005/2006 increased by 19.2% to 5.9 MMT,
due to increased harvested acreage and increased yields. Durum
production increased in all three Prairie Provinces, with production in
Saskatchewan increasing the most. Despite this, durum quality was
impacted by the challenging weather conditions at harvest time. In
Saskatchewan, approximately 26% of the crop is expected to grade No. 1,
which is higher than the 6% in the 2004/2005 crop year, but lower than
the 10-year average of 38 percent. High carry-in stocks and high
production resulted in a 25% increase in total durum supplies to 8.4 MMT
in 2005/2006. Durum exports in 2005/2006 are expected to increase to
approximately 3.7 MMT as a result of increased world demand and a larger
supply of higher quality durum in comparison to the 2004/2005 crop year.
Decreased production in North Africa has increased its durum import
demands. However, the forecasted increase in exports and domestic
consumption is not expected to be enough to offset the large supply of
durum, resulting in an approximate 40% increase to 3.5 MMT for the
2005/2006 ending stocks.

Canadian durum production is forecast to decrease in 2006/2007 to 4.5
MMT, due to a return to trend yields and a decline in seeded acreage.
The large ending stocks from the 2005/2006 crop year, combined with
production, will maintain total durum supplies at a high level. Durum
exports are forecast to decline in 2006, due to lower world import
demand, increased competition and burdensome world supplies of durum
that are depressing prices. The increase in barley production will also
help displace some use of lower quality durum in the livestock market,
resulting in a forecasted decrease in domestic durum consumption. Due to
this forecasted lower domestic consumption, a decline in exports and
large carry-in stocks, the 2006/2007 durum ending stocks are forecast to
remain high at 3.5 MMT.

## Barley 

Canadian barley production for 2005/2006 declined by 5.3% to 12.5 MMT,
due to an overall decrease in yield and harvested acreage. In Alberta, a
slight increase in yield was not sufficient enough to offset a decline
in harvested area, resulting in a 4.6% decline in barley production to
5.6 MMT in the 2005/2006 crop year. Barley production in Manitoba
decreased 50.2% to 681,500 metric tons (MT), due to excessive moisture
in the province. Saskatchewan was the only bright spot on the Prairies,
with a slight increase in yield and harvested area, resulting in 6.7%
increase in barley production to 5.3 MMT in 2005/2006. However, the poor
harvesting conditions in Saskatchewan and Alberta resulted in a barley
crop that was below average in quality, thereby increasing the already
abundant supply of feed barley on the Prairies. Due to a decline in
2005/2006 barley production in the Black Sea region, 2005/2006 Canadian
barley exports are expected to increase. Lower U.S. barley production is
expected to benefit Canadian barley producers. Canadian domestic barley
consumption continues to increase, as livestock producers shift back
from feed wheat to feed barley and continued growth in the livestock
industry fuels feed demand. As a result, total domestic consumption for
2005/2006 is expected to increase to approximately 10.9 MMT. Due to the
increase in exports and domestic consumption and the decline in
production, barley ending stocks for 2005 are expected to drop to 3.0
MMT.

Canadian barley production in 2006/2007 is forecast to increase to 12.8
MMT, due to an increase in seed acreage. Yields are forecast to return
to more normal levels and be lower than in 2004 and 2005. The malt
barley crop is forecast to be higher in 2006, based on the assumption of
normal crop quality. As a result of this and increased demand from China
and South America, 2006 malt barley exports are forecast to increase in
2006 to more than 1.0 MMT. However, the forecasted increase in malt
barley exports will not offset the decrease in feed barley exports in
2006, resulting in a forecasted decline of total barley exports to 1.9
MMT, a 9.5% decrease. The forecasted decline in feed barley exports is
due to increased demand from the Canadian livestock sector, higher
domestic prices, and increased competition from Australia. Domestic
consumption of barley is forecast to increase in 2006 to 11.7 MMT, as a
larger quantity of feed barley is utilized by the growing livestock
industry at the expense of corn. In addition, the imposition of tariffs
on U.S. corn imports is forecast to result in an increased movement of
feed barley from western Canada to eastern Canada. As a result of the
increase in domestic consumption and lower carry-in stocks, barley
ending stocks are forecast to decline to 2.3 MMT in 2006.

## Corn 

Canadian corn production in 2005/2006 increased by 7.2% to 9.4 MMT, as a
result of overall higher yields and a slight increased in harvested
acreage. Higher yields in Ontario helped offset the decline in that
province's harvested acreage, driving production up 8.1% to 5.8 MMT.
Corn production in Quebec remained unchanged in 2005. Although Manitoba
corn acreage was once again negatively impacted by poor weather
conditions, production dramatically increased from 17,800 MT in 2004 to
211,500 MT in 2005 due to increased harvested acreage and higher yields.
Corn imports in 2005 are forecast to decline to 2.0 MMT, due to the
increase in production, large carry-in stocks, and tariffs on U.S. corn
imports. Total domestic consumption of corn is expected to increase as
the ethanol industry in Ontario continues to expand production, drawing
from this year's large supply, and the livestock sector replaces western
feed grains with corn. Due to the forecasted decline in imports and the
expected increase in domestic corn consumption, corn ending stocks are
forecast at 1.5 MMT.

Despite a forecasted increase in seeded acreage, Canadian corn
production is forecast to decline in 2006/2007 to 8.8 MMT as a result of
lower yields. Based on the assumption that the countervailing and
anti-dumping duties will remain on U.S. corn imports at the provisional
level currently set, overall imports are forecast to decline to 1.7 MMT
in 2006. If the duties remain, but are lowered, imports of U.S. corn are
forecast to be even smaller than in 2005/2006, due to the delayed effect
that the duties are having on purchasing decisions. The use of corn in
livestock rations is also forecast to decline as a result of the
tariffs, with feed grains from western Canada expected to fill the void
-- a reversal from 2005/2006. The duty on U.S. corn may also result in a
decline in ethanol production, as domestic corn supplies are drawn down
and imports are reduced, and is expected to further contribute to the
decline in domestic consumption and imports. Corn ending stocks are
forecast to fall to 1.3 MMT, in spite of the forecasted decline in
domestic consumption, due to the offsetting factors of lower production
and imports. The 2006/2007 total supply of corn is forecast at 12.0 MMT,
a 9.6% decrease for these same reasons.

## Oats

Canadian oat production in 2005/2006 declined by 7% to 3.4 MMT, as lower
yields offset the increase in harvested acreage. Production in Manitoba
was dramatically impacted by poor weather conditions, dropping the
production estimate to 440,700 MT, the lowest production estimate since
1991 and a 51% decline from the 2004/2005 crop year. Lower harvested
acreage and a small decline in yield also reduced oat production in
Alberta to 859,000 MT. An increase in the harvested acreage and record
high yields helped drive Saskatchewan's oat production to 1.7 MMT in
2005/2006, helping to somewhat offset the decline in production in
Manitoba. Oat exports in 2005/2006 are expected to decline slightly to
1.25 MMT due to lower U.S. import demands. Domestic consumption is
forecast to increase slightly due to strong demand from both the
livestock sector and the domestic food industry.

Canadian oat production in 2006/2007 is forecast to increase to 3.8 MMT,
as a result of an increase in harvested acreage across the Prairie
Provinces and the expectation of the return of normal yields. Acreage
and production numbers in Manitoba are also expected to return to more
traditional levels in 2006/2007, due to lower production costs and
stronger prices. Exports are forecast to increase to 1.4 MMT, due to
increased import demand from the U.S. and the expectation of increased
supplies of milling quality oats. Domestic consumption is also forecast
to increase, due to a forecasted increase in demand for oats for feed
use. However, the increase in both domestic consumption and exports for
2006/2007 will not be enough to offset the increase in production and
ending stocks are forecast to increase only slightly to 1.0 MMT.

# STATISTICAL TABLES 

## Table 1: Wheat PSD

![](media/image2.wmf)

## Table 2: Durum Wheat PSD

![](media/image3.wmf)

## Table 3: Barley PSD

## 

![](media/image4.wmf)

## Table 4: Corn PSD

![](media/image5.wmf)

## Table 5: Oat PSD

![](media/image6.wmf)

Find FAS on the World Wide Web:

Visit our headquarters' home page at
[http://www.fas.usda.gov](http://www.fas.usda.gov/) for a complete
listing of FAS' worldwide agricultural reporting.

# 

# Recent Reports from FAS/Ottawa: 

  ----------------- ---------------------------------------- -------------
  Report Number     Title of Report                          Date

  CA5087            Strawberry Market Update                 12/30/2005

  CA5086            This Week in Canadian Agriculture, Issue 12/16/2005
                    42                                       

  CA5085            Provisional Dumping and Countervailing   12/16/2005
                    Duties on U.S. Corn Imports              

  CA5084            This Week in Canadian Agriculture, Issue 12/09/2005
                    41                                       

  CA5082            This Week in Canadian Agriculture, Issue 12/02/2005
                    40                                       
  ----------------- ---------------------------------------- -------------

VISIT OUR WEBSITE: The FAS/Ottawa website is now accessible through the
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on Embassy Ottawa offices, then Foreign Agricultural Service. The
FAS/Ottawa office can be reached via e-mail at: <agottawa@usda.gov>