UPDATE 1-Canadian wheat output seen at 6-year low, canola down 7 pct

Aug 31 - Canada's all-wheat crop will be the smallest in six years while the canola harvest should fall 7.1 percent from last year, Statistics Canada's first crop production report of the year estimated on Thursday.

Canola production looked set to reach 18.2 million tonnes, down from a revised 2016 estimate of 19.6 million tonnes, and below the average trade estimate of 18.6 million tonnes.

Analysts, however, noted that the figures were based on a farmer survey conducted from July 19 to Aug. 1, and conditions had improved since then.

"Farmers generally have a tendency to underestimate the canola crop at this time of year," said Jerry Klassen, manager of GAP SA Grains and Produits in Winnipeg.

"Canola has a history of adding yield very late in the season," said Ken Ball, senior commodity advisor with PI Financial. "If we can avoid frost in central and northern Alberta, the crop has quietly tacked on some bushels over the last few weeks," Ball said.

ICE Canada November canola futures rose after the Statscan estimate, supported by strength in allied U.S. soy markets, analysts said.

Statscan estimated Canada's all-wheat harvest at 25.5 million tonnes, the smallest since 2011. The 2017 figure was down 19.5 percent from last year's 31.7 million tonnes and below the average trade expectation of 26.2 million tonnes.

The government put production of durum wheat at 3.9 million tonnes, below the average trade estimate of 4.9 million tonnes.

"The durum number was extremely low, and that pulled down the all-wheat number," Ball said.

Farmers in the Canadian Prairies endured an unusually diverse patchwork of weather this year, from swampy soils in northern Alberta to hot, arid conditions along the U.S. border. Other regions had greenhouse-like conditions.

Durum is produced mainly in central and southern Saskatchewan, an area that struggled with dryness. Conditions were better elsewhere and early yields from the spring wheat harvest have been strong, Ball said.

"We are looking at some extraordinarily yields coming in the eastern Prairies," Ball said. "Most traders mentally will be bumping it (all-wheat production) up by 1 million tonnes, perhaps," he added.

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. (Reporting by Julie Ingwersen in Chicago and Dale Smith in Ottawa; Editing by Paul Simao)