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Canadian farmers to reap less canola, surprising trade

WINNIPEG/OTTAWA - Canadian farmers are set to harvest slightly less canola, surprising traders, but more wheat, according to Statistics Canada's first production report of the year on Tuesday.

Mostly favorable spring weather raised expectations of a bumper harvest in western Canada, where most of the country's grains and oilseeds grow. Summer storms, including tornadoes and hail, have since dampened some trade estimates.

Statscan, a government agency, estimated canola production at 17 million tonnes, down 1 percent from last year, and well below the average trade guess of 18.1 million tonnes.

Smaller harvested areas in Alberta and Manitoba are behind the decline, the agency said, while canola yields are expected to average 38 bushels per acre nationally, the same as last year.

ICE Canada November canola futures turned positive after the report, rising 0.6 percent.

"We had uneven (canola) germination and uneven crops," said Brian Voth, president of PrairieFarm Consulting in Manitoba, who expects the final canola harvest to be as small as 16 million tonnes. "That makes spraying a real nightmare, and I think that's why we're seeing such big issues with disease, sclerotinia and blackleg, that will keep the crop from really filling out."

Statscan pegged the all-wheat crop at 30.5 million tonnes - the second-largest harvest in 25 years - up 10.5 percent from last year and in line with trade expectations. The jump is mainly due to one-quarter more estimated production of durum wheat, at 6.8 million tonnes.

Minneapolis spring wheat futures for September delivery were little changed.

Canada is one of the world's largest wheat exporters and the biggest shipper of canola, used largely to produce vegetable oil.

Farmers are set to grow record-large crops of peas, 4.6 million tonnes, and lentils, 3.2 million, mainly to satisfy Indian demand after two straight years of drought there, according to Statscan.

Plentiful monsoon rains, however, could boost India's domestic crop production.

"Basically we're looking at overproduction of everything this year," said Tamara Khoma, special crops trader at Providence Grain, referring to pulse crops including lentils and peas. "Demand is growing, definitely, but not at the pace of production this year."

Oat production looks to drop 12 percent to 3 million tonnes, at the low end of a range of expectations, while barley output may rise 6 percent to 8.7 million tonnes, slightly higher than the average trade estimate.

Chicago nearby oat futures eased slightly.

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