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Stats Can Ups Canola, Wheat Estimates
9/19 1:14 PM
WINNIPEG (Dow Jones) -- Statistics Canada raised its production estimates for most crops across Western Canada in its new production report released Wednesday.
Unlike traditional reports that used information gathered from telephone surveys, the model-based report was comprised of satellite imagery collected during August. The report has only existed for a few years and has yet to garner the same amount of attention as the traditional method.
On Aug. 31, the agency estimated Canada's canola production in 2018-19 at 19.2 million metric tons, but that number grew to 21 million tons in the Wednesday report.
"I'm shocked," said Ken Ball of PI Financial in Winnipeg. "I kind of thought with the weather year we had this model might come out on the low end."
That thinking was echoed by other traders in the industry, who thought the difference in the two estimates was extremely large.
"That's huge, that's like 10%," said Bill Craddock, a trader who farms near Winnipeg.
The reaction to the increase in production was somewhat muted as canola dropped around a dollar in the wake of the report.
Most of the analysts said they would be looking closely for the end-of-year numbers to see which report was more accurate.
"The two stories just aren't the same," noted Neil Townsend, a senior analyst with FarmLink Marketing Solutions in Winnipeg.
The Statistics Canada reports tended to follow a similar trend, he said, with the survey-based production report initially underwhelming investors. After that the satellite data would come out and exceed its survey-based counterpart, with the final numbers eclipsing both.
"Nobody knows how seriously to take this thing," Mr. Ball said. "Obviously the model has gone down its own path."
Most other crop estimates were also raised with all-wheat growing from an Aug. 31 estimate of 28.9 million tons to 31 million tons under the satellite-based model.
"The wheat number was a little bit negative for the market," said Keith Ferley of RBC Dominion Securities.
Both Mssrs. Townsend and Ball agreed the end-of-year numbers for all-wheat could be over 31 million tons.
"If the December report comes out and lines up with the model, then Stats Can has a better argument for saying the model is the best way to go," Mr. Ball said.
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