Any attempts at rallies in the world wheat market continue to run up against “burdensome” global wheat supplies, putting pressure on the Canadian Wheat Board’s latest pool return outlooks (PROs) for the crop.
The CWB’s outlooks, released Thursday, saw most new-crop (2010-11) wheat values drop by between $1 and $6 per tonne from April levels, while most 2009-10 wheat values dropped by between $2 and $6 per tonne from the previous outlook levels in March.
In the 2010-11 PROs, the only increased values were in No. 3 Canada Western Red Spring (CWRS), 13.0 per cent protein, which rose to $191 per tonne ($5.20 per bushel), up $1 per tonne from April.
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No. 1 CWRS (14.5) slipped to $223 per tonne ($6.07/bu.), down $1, while No. 3 CWRS fell to $176 ($4.79/bu.), down $6 per tonne.
In the 2009-10 outlook, No. 1 CWRS (14.5) remained flat from March at $261 per tonne ($7.10/bu.), while No. 3 CWRS (13.0) fell $2, to $208 per tonne ($5.66/bu.).
No. 1 Canada Western Red Winter (CWRW) dropped to $177 per tonne ($4.82/bu.), down $4 from March.
“Global wheat demand has failed to keep pace with production and the end result has been a 60 per cent growth in ending stocks in three years,” the CWB wrote Thursday in its 2010-11 outlook.
Also, the CWB noted, “the general macroeconomic climate is characterized by a lack of confidence, unease and volatility. Greek financial issues have proven significant, revealing structural weaknesses across the European Union (EU) financial sector.
“Most critical to this month’s PRO, the current macroeconomic turmoil has resulted in the Canadian dollar depreciating six cents since the last PRO,” as risk-averse players trade out of the Canadian currency.
The CWB also noted Thursday it has started pricing for the expected 2010-11 deliveries of wheat, with about three per cent priced and about 25 per cent expected to be priced by the end of September.
The board said it’s also priced about 88 per cent of the expected 2009-10 deliveries of wheat. It’s expected that the CWB’s wheat pricing level will reach 95 per cent by the end of June.
Durum
Values for durum in the 2010-11 PROs are mostly $3- $5 per tonne higher, with No. 1 CW Amber Durum (CWAD), 14.5 per cent protein, up $5 at $195 per tonne ($5.31/bu.), No. 2 CWAD (11.5) up $4 at $178 per tonne ($4.84/bu.), No. 4 CWAD up $3 at $157 per tonne ($4.27/bu.) and No. 5 CWAD flat at $138 per tonne.
Values for higher-grade, higher-protein durum are up $1 per tonne in the 2009-10 PROs, with No. 1 CWAD (14.5) at $205 per tonne ($5.58/bu.), up from $204 in March, and No. 1 CWAD (11.5) up to $190 per tonne ($5.17/bu.). No. 2 CWAD (13.0) remains flat at $184 per tonne while No. 4 CWAD is down $4 per tonne at $145 ($3.95/bu.).
“Global durum beginning stocks are forecast to decline by approximately 15 per cent year-on-year,” the CWB noted. “However, it still represents a substantial supply and the decline is not forecast to be significant enough to recalibrate the durum price structure towards a higher threshold” in 2010-11.
Currency fluctuations further complicate the price picture, since the lower Canadian dollar has “bolstered” PRO values, but “there is no doubt that the euro has stumbled badly and is unlikely to appreciate significantly against the U.S. dollar in the near future.”
A lower euro reduces EU buying power and therefore cuts into durum demand from Europe, but it also boosts export competitiveness for European durum.
Barleys
Malting barley values are up $4 per tonne from April in the 2010-11 PROs, with Select CW two-row at $204 per tonne ($4.44/bu.) and six-row at $186 ($4.05/bu.). In the 2009-10 PROs, however, malting barley values remain flat from March at $209 and $191 per tonne for two-row and six-row respectively.
No. 1 CW feed barley remains flat at $143 per tonne ($3.11/bu.) in both the 2010-11 (Pool A) and 2009-10 (Pool B) PROs compared to April levels.
Feed barley is expected to remain “part of a broader feed structure including corn, dried distillers grains and improved pasture conditions,” the CWB wrote, and the “relative abundance of feed options will limit any prospects for higher feed barley values in 2010-11.”
Canadian barley acres and production are forecast to drop in 2010-11, which along with a “slight improvement” in livestock economics should support Canadian domestic prices and likely keep Canadian feed barley priced out of the global market, the CWB said.
Global weather conditions are “generally favourable” for barley production, the CWB wrote, but such conditions might allow some potential barley acres to end up in oilseeds or other alternatives that promise greater returns.
World supplies of malting barley are still “relatively comfortable, given successive years with favourable malt barley quality results. In fact, the 2009-10 malting barley supply will stretch well into 2010-11.”
