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Global financial crisis hits 2008-09 PROs

“Extraordinary events” in international currency, credit and commodity markets have spurred volatility that’s bit deep into the Canadian Wheat Board’s latest pool return outlooks (PROs).

“These events are also having a negative impact on global economic growth and are changing the buying behaviour of grain customers,” the CWB said Thursday in the release of its September 2008-09 PROs. “These conditions are expected to take some time to stabilize and have the potential to significantly impact overall pool returns.”

For example, the board’s September PROs cut wheat values by $27 to $31 per tonne compared to August levels. No. 1 Canada Western Red Spring (CWRS) 11.5 dropped $27 per tonne to sit at $316, while No. 1 Canada Western Red Winter (CWRW) fell $31 to sit at $287.

“In addition to external market factors, record world wheat production continues to push international prices lower,” the CWB said. “Exports from Europe and the Black Sea region have accelerated during the past month as harvest is essentially complete in those regions.”

The world supply of higher-quality wheat is down from last year, but its prices have still followed the general wheat market, the CWB said. Harvest activity in Canada and the U.S. are also pressuring spring wheat values, offset by crop concerns in Argentina and Australia.

Durum values, meanwhile, have dropped between $5 and $31 per tonne, with No. 1 CWAD down $5 to sit at $397 per tonne, and No. 5 CWAD down $31, to sit at $205.

The large European crop and slow export demand have pressured durum prices in the Mediterranean, the CWB said. And despite production difficulties in the western Dakotas, eastern Montana and parts of southern Saskatchewan, North American production is still expected to be up from last year. Customers are also now substituting lower-cost wheat for durum in many of their products, the CWB added.

Malting barley values in Thursday’s PRO have dropped $13 from their levels in a Sept. 11 mid-month PRO, with Select CW two-row and six-row now at $335 and $315 per tonne respectively. Global malting barley values fell on the general downward movement of commodity markets, the winding down of the North American harvest and overall larger supplies expected despite deteriorating crop prospects in Australia, the CWB said.

Feed barley levels, meanwhile, have dropped $23 per tonne, with No. 1 CW (Pool A) now at $220. Canada and the U.S. are posting good yields, corn futures values have dropped by almost five per cent since the last forecast, and exports from Europe and the Black Sea region are pressuring international prices in the face of “limited” buying interest in the Mediterranean and Middle East, the CWB said. Offsetting those pressures are ongoing dry conditions in Australia.

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