WASHINGTON, D.C., U.S. — Canada’s combined production of wheat, barley, corn and oats is forecast to fall marginally in 2016-17 as a result of small increases in wheat and barley production being offset by a 10% decrease in corn production, the U.S. Department of Agriculture’s (USDA) Foreign Agricultural Services (FAS) reported on Jan. 29.

Total exports of wheat, barley, corn and oats in 2016-17 are forecast to fall 8% as increases in barley exports are not high enough to offset an anticipated drop in wheat exports. The weakness of the Canadian dollar compared to the U.S. dollar has been helping Canada aggressively export grain in the 2015-16 marketing year. This advantage will likely weaken in the coming months as oil is expected to recover somewhat and the Canadian dollars strengthens.

Overall wheat production in 2016-17, Canada’s primary grain crop, is forecast to increase by 3% from 2015-16 production levels. Barley production is expected to increase 2% from 2015-16 levels. Oat acres will be competing with wheat. Corn production is expected to decrease over 10% as a result of more acreage going to soybeans. Last year, while the Canadian dollar was falling, Canadian grain producers were enjoying the ability to buy inputs with a stronger Canadian dollar in the fall and spring and then sell the crop when the Canadian dollar was weaker. The stabilization of the Canadian dollar is expected to result in less expansion of land in production and foster a drive to efficiencies.

A dry spring is predicted for western Canada due to a carry-over from a dry summer and below average precipitation occurring in the winter months. The El Niño weather pattern is weakening but will likely prevail through the spring of 2016 resulting in continued moisture deficits. Most recent weather data suggests that the La Niña effects, which would bring wetter weather to Western Canada, will only occur close to the harvest season.

The report forecasts Canada’s 2016-17 wheat harvested area at 9.26 million hectares, a 3.5% decrease from 2015-16 reported levels. It is expected to return to average yields that will offset the harvested area decline for an estimated 2016-17 wheat production of 28.3 million tonnes, the report said. This forecasted 3% increase in production over 2015-16 levels will not be sufficient to overcome low-carry-in stocks resulting in a lower forecasted total supply. Lower wheat supplies will limit Canadian wheat exports in 2016-17. With stable cattle markets expected in 2016-17 combined with tighter domestic wheat supplies, barley is expected to be a less expensive alternative to wheat resulting in a decrease in wheat destined for the feed industry. Lower domestic supplies will pull stocks down.

In 2015-16, the lower Canadian dollar has resulted in wheat export pace well above the five-year average but close to the previous year’s export pace. A strengthening Canadian dollar and high world supplies combined with lower domestic supplies will slow the export pace as the marketing year progresses. Exports in 2015-16 are expected to reach 22 million tonnes, 4.8% higher than USDA current official estimate of 21 million tonnes.

The report forecasts Canada’s 2016-17 barley harvested area at 2.45 million hectares, a marginal increase over 2015-16 area. Due to anticipated better yields, barley production in 2016-17 is forecast at 8.4 million tonnes, an increase of 2% over the previous year’s level. Higher carry-in stocks will support an increase in exports, although stocks are forecast to increase slightly.

In 2015-16, demand from the feed industry is expected to grow as cattle producers are beginning to switch to barley as a cheaper feed alternative as a result of tightening domestic supplies of wheat. It is expected feed will reach 5.35 million tonnes, a 2.9% increase above the USDA official estimate. This trend is expected to continue in 2016-17.

In 2016-17, corn production is forecast to decrease 10% from 2015-16 levels to 12.1 million tonnes. This is a result of increased acreage going to soybeans due to expected better returns. Imports are forecast to rise to 1.4 million tonnes as a result — the U.S. being the predominant supplier. Lower domestic supplies and strong demand from the feed industry is expected to limit corn exports in 2016-17. In 2015-16, a weaker Canadian dollar compared to the U.S. dollar is resulting in increased corn exports compared to the previous year; however exports will be limited by strong demand from the domestic feed industry. Corn exports are forecast at 800,000 tonnes, 2% lower than the current USDA official estimate. Ending stocks in 2015-16 are expected to rise due to lower exports.