August 28, 2009

The Canadian Wheat Board lowered its price projections on Thursday (August 27) for wheat, durum and barley that will be delivered by producers during the 2009-10 crop year, which began Aug. 1.

 

The pool return outlook for most classes of wheat fell C$19 (US$17.45) to C$28 (US$25.77)from the July estimate.

 

The decline in the outlooks for wheat reflected the ongoing harvest activities in the Northern Hemisphere and the generally favourable growing conditions, the CWB said.

 

The US futures markets has also dropped more than 50 cents per bushel over the past month, as harvest pressure and improvement in spring wheat conditions added to overall supplies.

 

Corn values were also pressured by improvement in the condition of the US crop, which in turn pressured wheat values, the CWB said. The ongoing volatility of international currency relationships continues to add uncertainty to Canadian dollar price outlooks.

 

The CWB said August projections for world wheat production were increased by the USDA due mainly to the larger crops in the US and the European Union.

 

The bulk of the European and Black Sea winter crop is now harvested, with only a small drop in yields from last year's s records expected. The lateness of the US spring wheat crop continues to present increased quality risks, but yield potential is expected to be above average.

 

In Canada, some harvesting of winter wheat has occurred, but a significant portion of the crop is still vulnerable to yield and quality damage due to the lateness of the crop.

 

The CWB said that while conditions in the Northern Hemisphere have been largely positive this year, conditions are different in the Southern Hemisphere. Production potential in Argentina and Australia has been hurt by recent dry conditions, the CWB said. Hot, dry conditions in north-eastern Australia are causing a drop in yield potential, but the rest of the main growing regions are still reporting reasonable production prospects.

 

The outlook for durum was down C$27 to C$31 per tonne.

 

International durum values were pressured this month as North American production is expected to be up from earlier projections, the CWB said. Prices were also pressured by the completion of the Mediterranean region harvest.

 

European crop quality has been mixed, with rains causing problems with Italian quality. However, France, Spain and Greece are reporting mostly good quality, the CWB said.

 

Despite increased production potential in the US and Canada, the total durum crop is still expected to be slightly lower than in 2008-09.

 

The quality of the US and Canadian crops is still largely to be determined, as less than 5 percent of the harvest is complete in both countries. The quality of the North American harvest will play a large role in determining price movement during the next year, the CWB said.

 

The outlook for malting barley was lowered by C$18 to C$20 per tonne while the value for feed barley was down C$4.

 

Excellent quality and above-average yields in Europe have pressured international malting barley prices over the past month, the CWB said. Increased supplies of European malting quality barley, combined with higher global carry-in, have increased overall world supply.

 

This has resulted in a significant narrowing of the spread between malting quality barley and feed barley, especially for six-row.

 

After a drier June and early July, Australia has received timely rains in its key barley growing areas, maintaining expectations for a large barley crop this year, the CWB said.

 

Canadian supplies of malting barley are expected to be lower due to the smaller crop. Harvest weather during the next month will be critical in determining supplies of Canadian malting barley.

 

As for feed barley prices, the CWB said that after a brief corn price rally in early August, reports of a large crop have pressured Chicago Board of Trade futures values over the past three weeks.

 

In August, the US Department of Agriculture increased its 2009-10 US corn production forecast by 4 percent to 324.1 million tonnes.

 

Good harvest weather allowed Russia and Ukraine to finish their winter barley harvest earlier than normal, and they are now well into the spring barley harvest, the CWB said. Despite the tighter global barley carryout forecast for 2009-10, lower feed demand and adequate coarse grain availability have lowered feed barley price expectations.

 

Canadian production is a supportive factor, with Statistics Canada's first production estimate of the crop year indicating that the 2009-10 crop will be the smallest since 2002-03, the CWB said.