While wheat production and use during 2011-12 are still “very much moving targets,” the Canadian Wheat Board’s first outlook for the coming crop year sees market fundamentals pointing to “historically strong” prices.
The CWB released the new PRO Monday during its annual GrainWorld conference in Winnipeg, pegging high-protein wheat (No. 1 Canada Western red spring, 14.5 per cent protein) at $365 per tonne ($9.93 per bushel).
Global production is estimated at 653.5 million tonnes, up by only seven million tonnes over 2010-11, but supplies are expected to drop by 15.2 million tonnes due to lower carry-in stocks, the board said.
Wheat demand, meanwhile, is estimated at 660 million tonnes, down five million from 2010-11 demand estimates, based on expectations for “a return to more normal grade patterns, which would reduce availability and feeding of low-quality wheat.”
For example, the 2011-12 PRO pegs the value of No. 3 CWRS wheat at $304 per tonne ($8.27/bu.) and No. 4 CWRS at $278 per tonne ($7.57/bu.).
The value for No. 1 CW red winter sits at $294 per tonne ($8/bu.), while CW feed-grade wheat is valued at $240 ($6.53/bu.).
The board has no wheat priced yet for anticipated 2011-12 crop year deliveries and expects 2011-12 wheat will be about 25 per cent priced by the end of September.
Durum ending stocks are projected to fall in all three of the world’s major durum-growing regions in 2011-12, with U.S. stocks are forecast to fall by over 35 per cent, Canada’s by 14 per cent and the EU’s by about 22 per cent.
“Production will be a key determinant in price direction and, of the three majors, only Canada is forecast to see a year-on-year production increase,” the CWB said.
Overall, the board cautioned, “it must be emphasized that we are a long way from harvesting and marketing the 2011 durum crop. Durum prices are expected to continue to exhibit a high degree of price volatility as the crop moves through its production cycle.”
The 2011-12 PRO pegs the highest-protein durum (No. 1 CW amber durum, 14.5 per cent) at $383 per tonne ($10.42/bu.), with No. 3 CWAD at $322 ($8.76/bu.) and No. 5 CWAD at $240 ($6.53/bu.).
World barley production is forecast to rise by 10 per cent from last year, with the Black Sea region’s output expected to return to average or above-average levels, reducing the opportunity for Canadian feed barley to compete for market share in Saudi Arabia, the CWB said.
A return to “more normal” grade patterns for wheat and barley in Western Canada would reduce feed wheat availability and “return barley to prominence” in Canadian feed rations, the board added.
And presuming “average conditions prevail,” the world should have a “deeper well” of quality malting barley in 2011-12, the CWB said.
In the meantime, the CWB cautioned, “there are virtually no carry-out stocks (of malting barley), there is no imminent harvest and planting in Australia, Canada and the U.S. is still two to three months away.”
Noting China was “remarkably resistant” to price increases coming out of the 2010-11 quality wrecks in both Australia and Canada, the board expects that if greater dem and for higher-quality malting barley emerges from China, international malting barley prices would be “more robust” as a result.
No. 1 CW feed barley (Pool A) is pegged at $257 per tonne ($5.60/bu.) in the 2011-12 PRO, which puts values for Select CW two-row and six-row malting barley at $337 ($7.34/bu.) and $320 ($6.97/bu.) per tonne, respectively.