March 27, 2009

The Canadian Wheat Board has raised its price projections for wheat that will be delivered by producers during the 2009-10 crop year, which begins Aug. 1, 2009, and ends July 31, 2010.

 

The pool return outlooks, or PROs, for durum and malting barley were lowered, while feed wheat and feed barley price outlooks were left unchanged.

 

The CWB said the PROs for most grades of wheat were raised C$8 per metric ton from its February outlook.

 

World wheat production is expected to shrink in the new crop year by 30 million to 50 million tonnes, but is still projected to be the second-largest crop on record. The International Grains Council released its initial forecast for a 2009 world wheat crop of 651 million tonnes, down 36.5 million from last year.

 

The large oversupply of wheat in 2008-09 allowed major exporting countries to build wheat stocks, pressuring prices throughout the crop year.

 

Concerns about the hard red winter and hard red spring wheat crops in the US should provide some support as the market focus shifts to new-crop conditions, the CWB said. Parts of the HRW growing region, including western Texas, Oklahoma and western Kansas, continue to be under moderate to severe stress due to lack of soil moisture.

 

Flooding in the Red River Valley has increased planting concerns for southern Manitoba, North and South Dakota and Minnesota. The flooding is expected to delay spring wheat planting and may result in increased area planted to soy instead of spring wheat.

 

Crop conditions in Eastern Europe were favourable this past month. However, dryness in China, western Iran and Argentina should be supportive to prices.

 

Weather, the economy and the Canadian dollar will play significant roles in the evolution of prices in the new crop year, the CWB said. There has been a slight strengthening in the Canadian dollar this past month, which has not been supportive for PRO values. Ocean freight rates also increased this past month on stronger demand; however, freight rates are still at very low levels historically.

 

The PROs for durum were reduced C$3 per tonne from the CWB's February projection as the North African durum crops are looking exceptionally good as they enter the critical reproductive growth stage.

 

Durum production is expected to decrease in Europe, the US and Canada, the CWB said. However, increased area and good growing conditions in North Africa should limit any significant decrease in total production.

 

The smaller European Union crop should increase European demand for durum in the next crop year, but increased production in North Africa will reduce import demand in that region. The 2009-10 durum crop in the US is expected to be in line with the 2008-09 crop, but, with larger carry-in stocks, total supply is projected to be higher, which will add pressure to prices in early summer.

 

The PROs for designated barley were also lowered C$8 per ton from the February projection. The CWB said the European winter barley crop has developed under mostly normal conditions. Above-average temperatures and light to moderate rainfall in Germany, France and the UK were seen as beneficial for spring barley prospects. Demand from importing countries is expected to remain strong in the upcoming crop year, helping to support prices. Adequate barley supplies in the coming year are expected to narrow the spread between feed and malt quality barley to more traditional levels, the CWB said.

 

Feed barley PRO prices were left unchanged. The CWB said global barley production is expected to decrease in 2009-10, but will still be larger than average. Canadian production is expected to decline significantly, while the US, Australia and Ukraine is projected to have large supplies of barley.

 

Large supplies and a struggling livestock sector will pressure feed barley prices. Tightening US corn supplies and less feed wheat should offset the weakened demand and provide some support to feed barley prices in 2009-10, the CWB said.