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Loonie, ocean freight rates support PROs

A weaker Canadian dollar and a “dramatic drop” in ocean freight rates are supporting the Canadian Wheat Board’s latest pool return outlook (PRO) for wheat, in the face of a record world wheat crop.

Milling wheat values rose $5 per tonne in the November 2008-09 PROs, released Thursday. For example, the PRO value for No. 1 Canada Western Red Spring (CWRS) at 14.5 per cent protein increases to $324 per tonne, while No. 1 Canada Western Red Winter (CWRW) rises to $268 per tonne. CW Feed-grade wheat also rises $5 per tonne, to $200.

The CWB said the “extreme volatility” seen in financial markets is now mirrored in commodities, with values for U.S. wheat futures showing “large price swings” on their way to current levels close to those from a month ago.

The record world wheat crop, which the U.S. Department of Agriculture recently pegged at 682 million tonnes, continues to pressure prices in most exporting regions, the CWB said.

Early-season dryness and recent heavy rains have hurt the Australian wheat crop but it’s still expected to yield 50 per cent more wheat than in 2007, the board added. As well, Argentina’s crop is declining in hot and dry conditions. But those production problems only provide “minor support” to current wheat futures and cash markets, the CWB said, noting large crops from Europe and the Black Sea region.

Durum values also rose in the November PROs, by $10 per tonne. No. 1 Canada Western Amber Durum (CWAD) at 13 per cent protein rises to $360 per tonne, No. 3 CWAD (13 per cent) rises to $333 and No. 4 CWAD to $302. Feed-grade No. 5 CWAD is up just $5 per tonne, to $200.

Along with the supports from the lower loonie and lower ocean freight rates, most major durum-growing areas of the world have completed their harvests, the CWB said, leading world durum prices to stabilize somewhat during the past month. Demand is expected to pick up in coming months as durum-consuming countries exhaust their supplies, the CWB said.

Barleys

PRO values for both designated (malting) barley and feed barley are down $3 per tonne in the November PROs, with No. 1 CW feed barley (Pool A) now at $190 per tonne, and Select CW two-row and six-row malting barleys at $324 and $304 per tonne respectively.

Global prices for both malting barley and feed barley continue to decline, the CWB said. Large barley crops have been harvested in Europe and the Black Sea region and are being “aggressively marketed,” leaving North American barley values less competitive despite the drop in ocean freight rates.

Malting barley prices have moved lower internationally, the CWB added, more than offsetting the support from the lower Canadian dollar and freight rates.

“Prices have been supported somewhat by deterioration of the Australian crop and increased concerns about crop quality,” the CWB wrote. “European malting barley values have stabilized, due to earlier Danish sales that cannot be fulfilled, but remain lower than a month ago.”

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