High protein best hope for avoiding Canadian wheat weakness

Higher protein levels represent the best hope for wheat farmers to avoid wheat market weakness, which looks set to remain entrenched despite Canada's disaster spring, according to the Canadian Wheat Board (CWB).

The grain marketing giant, which stunned markets two weeks ago by revealing that up to 12.5 million acres of Canadian cropland may be lost to a wet spring, said that one factor that offers grounds for optimism was better prospects for hard wheat prices.

Early projections had suggested that the premium enjoyed by higher protein wheat, such as that traded in Kansas and Minneapolis, would "decrease closer to average levels" in 2010-11 from the "historically generous" levels of last year.

However, the CWB noted that the challenges in western Canada, early US hard red winter harvest results offer support for the maintenance of the current higher protein spreads. Early tests of the US winter wheat crop showed disappointing protein levels.

The prospects for wheat prices overall, meanwhile, were poor, despite Canada's difficulties.

"There is no panic over the global wheat supply. On the contrary, US total wheat supply in 2010-11 is forecast close to 1bn bushels, described by some as the biggest free stocks on record," the board said.

While there were some drought fears in Kazakhstan and Russia, there remains a need for further weather-related problems in world wheat production areas to push the world towards a more bullish demeanour.

The CWB restated its warnings of severe crop damage to excessive moisture across large swaths of the western Canadian growing region, losses which were not picked up by official data earlier this week, based on a survey undertaken before the board's caution.