WINNIPEG: Canadian farmers expect to harvest 9% less canola due to reduced plantings, according to a government report released on Wednesday amid a diplomatic dispute between Canada and China, the top importer of the crop.

The dispute, centered on the arrest of a Chinese executive in Canada and China's decision to detain two Canadians, has curbed canola export sales since early this year and weakened prices just as farmers were deciding what to plant this spring.

Dry conditions threatened crops earlier, but timely rains in June and July boosted crop prospects, Statistics Canada said in its first production forecast.

Canola production looked set to reach 18.5 million tonnes, below the average trade estimate of 18.9 million tonnes.

"It's a little shy of expectations and that should lead to some fund support," said Dave Reimann, market analyst at Cargill Ltd's grain marketing services division, referring to potential speculator buying of canola futures. "It's a little bullish."

ICE Canada November canola futures traded 0.4% higher in thin, early trading on Wednesday.

Farmers, however, tend to underestimate their harvests in summer when surveyed by Statistics Canada, and final crop figures in December are usually higher, Reimann said.

Statscan pegged the all-wheat harvest at 31.3 million tonnes, down 2.9% from last year due to a smaller harvested area. The average trade expectation was 32.3 million tonnes.

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