July 25, 2008

 

CWB lowers 08/09 Canada wheat price outlook

  

 

The Canadian Wheat Board lowered price projections Thursday (July 24) from June forecasts for most grades of wheat that will be delivered by producers during the 2008/09 crop year that begins August 1.

  

Canadian western feed wheat, durum, feed barley and designated barley values were unchanged from the previous month's outlook.

  

The Pool Return Outlooks (PRO) for the various wheats, with the exception of the western feed wheat contract, were lowered C$11.00 per tonne from the June projection.

  

The CWB said the drop in the price outlook for wheat reflected the fact that futures markets have moved lower during the past month due to favourable weather conditions for the US winter wheat harvest and improved row-crop prospects.

  

World wheat production also continues to be a negative factor in international markets as the Northern Hemisphere winter cereal harvest is underway, the CWB said.

  

International wheat prices have dropped in response to the harvest, especially in the Black Sea and Europe. World wheat production is still forecast to be a record, with the USDA's most recent estimate at 664 million tonnes, up by more than 53 tonnes from last year.

  

Prices have been supported by concerns about the winter wheat crops in the Southern Hemisphere, which have experienced a poor start to the growing season. Lingering drought conditions in Australia and Argentina have lowered expectations for crop production from both countries, the CWB said.

  

Spring wheat markets have been pressured by the ongoing harvest and improved quality of the US hard red winter wheat crop. HRW quality has been good, with only minor harvest damage reported. Although basis levels for soft red winter and white winter wheat have improved slightly from last month, they remain extremely low compared with historical averages.

  

The CWB said improved crop conditions for the row crops in the US have resulted in a drop in the December corn futures of over US$1.70 per bushel in the past month. US corn export prices are now close to the comparable prices for SRW at the Gulf. In Western Canada, production prospects have increased from last year, but are still below the five-year average.

  

The CWB said international durum prices have softened this month as the harvest in the Mediterranean basin nears completion. European harvest conditions have been mostly favourable in southern growing areas, which have resulted in an average quality harvest. The European crop is larger than last year and of more consistent quality, which will pressure prices during the coming months.

  

Western Canadian durum production prospects have improved over the past month as frequent rainfall in the southern Prairies has boosted soil moisture levels. Production is expected to be higher than last year and above the five-year average.

  

The durum region in the US northern Plains reports mixed conditions, with crop stress reported in the extreme western areas of North Dakota and eastern Montana, the CWB said. Durum crop ratings in both states have dropped significantly in the past month and yield prospects are declining.

 

Designated barley and feed barley PRO values were left unchanged from the June projection.

  

The CWB said international prices for designated barley have softened due to the impending harvest of spring barley in Europe. Although recent rains on the spring barley harvest in Europe are causing some concerns about quality in the European Union, prices have been pressured by the favorable yield prospects. Declining conditions in Australia, especially in the eastern half, will help support malting barley prices.

  

Good growing conditions in Canada have been offset by increased concerns about US malting barley prospects, the CWB said. Dry conditions in North Dakota and Montana have stressed the barley crops in the northern Plains and resulted in declining crop conditions.

  

The harvest of winter barley is underway in Europe and the Black Sea region, resulting in large declines in international prices for feed barley, the CWB said.

  

Yield prospects in the Black Sea region and Europe remain favorable as the crops enjoyed a relatively stress-free growing season. Feed barley prices in North America have declined during the past month, due mostly to the drop in corn values.

  

Dryness in Australia is providing some support as the prospects for average yields begin to decline, the CWB said.

  

Crop conditions in the Canadian growing areas are mostly good, despite poor soil moisture levels and reduced yield expectations in the extreme northern growing areas of Alberta. Late season dryness in the Pacific Northwest, Montana and North Dakota has stressed barley crops and caused condition ratings to drop over the past month. Deteriorating crop conditions in the US will help provide some level of support to feed prices, the CWB said.