UPDATE 2-Dry summer seen curbing Canada wheat, canola crops more than expected

(Adds estimates on yield, other crops' output, analyst's
comment)
By Rod Nickel and Simon Doyle
CHICAGO/OTTAWA, Aug 21 (Reuters) - Canada is on track to
produce less wheat and slightly less canola than traders had
estimated after a dry spring and summer curbed production,
according to the national statistics agency's first crop output
report of the year.
Statistics Canada on Friday pegged the all-wheat crop at
24.63 million tonnes, the smallest in five years and down 16
percent from last year. It also missed the average trade
expectation of 25.6 million tonnes.
Canola production looked set to reach 13.34 million tonnes,
the lowest since 2010 and down 14 percent from 2014. The
estimate narrowly missed the average trade guess of 13.6 million
tonnes.
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Canada is one of the world's biggest wheat exporters and the
biggest shipper of canola, a cousin of rapeseed used largely to
produce vegetable oil.
Farmers replanted many canola fields in Manitoba after
damaging May frosts, while hot, dry conditions in Saskatchewan
and Alberta stunted growth of canola, durum and spring wheat.
Steep drops in yields led to lower output estimates,
Statscan said. It expects the average all-wheat yield to tumble
17 percent to 38.1 bushels per acre, while the average canola
yield may drop 13 percent to 30 bushels per acre.
Output estimates "are certainly a bit lighter than the trade
estimated," said Cargill Ltd CARGIL.UL market analyst Dave
Reimann. "Having said that, I think the market will view these
as some of the lower numbers we'll see this year."
The dry western Prairies received some rain and moderate
temperatures since Statscan conducted its farmer survey from
July 22 through Aug. 3, Reimann said.
ICE Canada November canola futures RSX5 were little
charged at C$478.20 per tonne after the report.
The drop in canola production sets up a supply squeeze for
Canadian crushers and exporters, said market analyst Wayne
Palmer of AgriTrend Marketing.
"I think it will be a big problem," Palmer said on a
conference call hosted by Minneapolis Grain Exchange to discuss
the report.
Farmers have started harvesting on the Prairies, but with
crop development more variable than usual, they need the first
severe frost to happen later than its usual date of about a week
into September, Palmer said.
Statscan said farmers would produce 4.467 million tonnes of
durum, down 14 percent to a four-year low. But barley production
looks to increase 3 percent to 7.3 million tonnes, and oat
output may climb 14 percent to 3.31 million tonnes.