Grain processors trying to reduce risk through “hand-to-mouth” purchasing have cut deep into the Canadian Wheat Board’s latest pool return outlooks (PROs), the CWB reported Thursday.
Offset somewhat by the recent declines in both the Canadian dollar and ocean freight rates, the uncertainty and concern in financial and commodity markets continue to impact the buying behaviour of the CWB’s grain customers, the board said.
Grain processors have drawn down inventories, delayed capital investments and moved to “hand-to-mouth” purchasing at a time of record world wheat supply, the CWB said, and the resulting weaker demand is an “underlying factor” in the recent “dramatic” declines in grain market prices.
PRO values for 2008-09 milling wheat have thus been cut by $24 per tonne from September PRO levels, with No. 1 Canada Western Red Spring (11.5) dropping to $292, No. 1 Canada Western Red Winter dropping to $263 and No. 1 Canada Western Soft White Spring down to $233. CW Feed wheat is down $10 per tonne, at $195.
Milling durum values, meanwhile, are down $37 per tonne from September 2008-09 levels, with No. 1 Canada Western Amber Durum (CWAD 14.5) down to $360 per tonne, No. 3 CWAD down to $316 and No. 4 CWAD down to $292. Feed-grade No. 5 CWAD is also down $10 per tonne, to $195.
Supplies of durum are “significantly” larger than last year, the CWB said, especially in North America and Europe. And world durum demand remains slow, as most importers are still using domestic supplies, the board said.
Feed barley prices in North America have dropped in the past month during the barley harvests in Canada and the U.S., the CWB said, and corn futures values have dropped by over 30 per cent during the last month and 10 per cent since the mid-month barley PRO on Oct. 9. International prices, pressured by “aggressive” exports from Europe and the Black Sea region, are offset slightly by dry conditions in Australia.
Thus, the October 2008-09 PROs for No. 1 CW Pool A feed barley are down $5 per tonne from the Oct. 9 PRO, to $193 per tonne.
Designated barley values, meanwhile, remain unchanged from Oct. 9 at $327 and $307 per tonne for Select CW two-row and six-row, respectively.
Both the demand and supply-side fundamentals for malting barley are weaker, the CWB said, but the weaker dollar, the “collapse” of ocean freight rates to near six-year lows and the “relatively advanced” sales position of the malting barley pool have kept projected returns stable since Oct. 9.