Economic crunch hits CWB’s 2009-10 PROs

The Canadian Wheat Board’s first pool return outlooks (PROs) for the 2009-10 crop year find the global economic crunch affecting customers’ demand and/or buying patterns for Prairie grains.

The PROs, released Monday during the CWB’s GrainWorld conference in Winnipeg, show the board now forecasting a drop in world wheat production of at least 30 million tonnes off last year’s (2008-09) record world wheat crop of 683 million tonnes.

In turn, the CWB wrote, “the decrease in global wheat prices over the past year has resulted in lower wheat area in most of the major growing areas of the Northern Hemisphere.”

North American spring wheat acreage, the board said, is expected to decline this year and should approach the lows seen in 2007-08. Flooding concerns in Manitoba, North Dakota and northwestern Minnesota may also pressure wheat acres this spring.

Reduced wheat production is expected to be accompanied by a drop in consumption, due mostly to a “sharp decline” in wheat used for feed, although the global demand for human consumption of wheat is expected to remain relatively stable despite the global recession, the CWB said.

However, “tight credit markets are expected to continue to influence the buying patterns of customers in the coming year, with most business expected to be done on a hand-to-mouth basis.”

A drop in global wheat consumption is expected to lead to a further building of global wheat stocks in 2009-10 — but increased stocks are expected to have only a small impact on price movement in the coming year, the CWB said.

The CWB’s PRO for No. 1 Canada Western Red Spring (CWRS) wheat at 14.5 per cent protein sits at $302 per tonne, well down from the 2008-09 PRO of $399 in February 2008. No. 3 CWRS, for another example, sits at $255 per tonne in the new PRO, down from last February’s 2008-09 PRO of $360. No. 1 Canada Western Soft White Spring (CWSWS) Select (under 9.9) sits at $253 per tonne, down from the previously unpublished February 2008-09 PRO of $364.

Durum

International durum prices are expected to see pressure during the first half of the 2009-10 crop marketing year due to increased carryout stocks and the arrival of the new-crop harvest, the board said Monday.

But world durum production is expected to decrease from 2008-09 levels due to fewer seeded acres expected in Europe and North America. Global durum stocks are expected to decline in 2009-10, which the CWB expects will help support prices later in the marketing year.

No. 1 Canada Western Amber Durum (CWAD) sits at $314 per tonne in Monday’s new 2009-10 PRO, well down from last February’s 2008-09 PRO of $470 per tonne. No. 3 CWAD sits at $270 per tonne in the new PRO, down from last February’s $435.

Barley

The outlook for international feed barley prices remains poor, the CWB reported, as the downturn in the global economy leads to reduced feed demand. World barley production is expected to decline from last year, but will still be above the long-term average. Canadian production is expected to be lower than in 2008-09, but that again will be partially offset by the drop in feed demand.

That leaves the new 2009-10 PRO for No. 1 CW Pool A feed barley at $161 per tonne, well down from $235 in last February’s 2008-09 outlook.

Malting barley prices, meanwhile, are expected to be lower in 2009-10 due to increased supplies of malting barley. Increased production in Australia is expected to be partially offset by reduced Canadian supplies, which are down due to a drop in area and expected yields.

“Current expectations are for a slight drop in production but an increase in malting supplies,” the CWB said. “The international malting-barley-to-feed-barley spread is expected to remain at relatively high levels.”

The new 2009-10 PROs released Monday for designated barley are at $263 and $243 per tonne for Select CW two-row and Select CW six-row respectively, also well down from $360 and $340 in last February’s 2008-09 outlook.

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