Drought shrinks Canada's wheat crop to 14-year low, shrivels canola harvest

WINNIPEG -

Drought has shriveled Canada's wheat crop to its smallest in 14 years, and its canola harvest to a nine-year low, a government report showed on Monday.

Parched soils and record-hot temperatures in Canada's western crop belt sharply reduced farm yields of one of the world's biggest wheat-exporting countries and largest canola-growing nation. The drought has forced millers and bakers to pay more for spring wheat, and drove canola prices to record highs.

Statistics Canada, in this year's first report on crop production, estimated the all-wheat harvest at 22.9 million tonnes, down 35 per cent from last year and slightly larger than the average trade expectation of 22.6 million tonnes. Canola production looked set to reach 14.7 million tonnes, down 24 per cent from last year, and also larger than the average trade forecast of 14.1 million tonnes.

"I think buyers around the world have already made major shifts," said Brian Voth, president of IntelliFARM, a farmer advisory service. "A lot of rationing has to happen."

Canola importers may turn to Ukraine, western Europe and Australia for substitutes, while U.S. mills that depend on Canadian wheat to produce flour may need to blend in wheat from other countries, Voth said.

Harvests are small, but not as tiny as some expected, Voth said, adding that some of his farmer clients in Manitoba produced better yields than they expected.

ICE Canada November canola futures were little changed after the report, trading up 0.4 per cent. Canola, a cousin of rapeseed, is used largely to produce vegetable oil.

Minneapolis spring wheat futures also traded slightly higher.

Statscan used satellite imagery and agro-climatic data up to July 31 for the report. It will provide updated crop estimates on Sept. 14.

(Reporting by Rod Nickel in Winnipeg; Editing by Susan Fenton)