New-crop PROs favour higher-protein spring wheats

The rains that pounded Prairie crops and unseeded fields in recent weeks may not be as supportive to global wheat prices as growers might like, the Canadian Wheat Board warns.

The board, releasing its latest new-crop pool return outlooks (PROs) Thursday, warned that Western Canada’s excess rainfall shows “the dilemma of the particular versus the general” and noted “there is no panic over the global wheat supply.”

That said, the Prairies’ weather issues, along with early U.S. hard red winter wheat harvest results and the likelihood of a high-yielding U.S. spring wheat crop, have lent some support to higher protein spreads, the board noted.

A global wheat market that’s “somewhat challenged” in protein supplies led to PRO hikes for higher-protein spring wheats in the CWB’s June 2010-11 PRO.

For example, No. 1 Canada Western Red Spring (CWRS) at 14.5 per cent protein was pegged Thursday at $229 per tonne ($6.23 a bushel), up $6 per tonne from May PRO levels; No. 1 and No. 2 CWRS were at 13.5 per cent protein up $4, at $218 and $214 per tonne, respectively; and No. 1 and 2 CWRS (11.5) were up $3, at $191 and $187.

Still, the CWB noted in Thursday’s outlook, “many of the fundamentals in the global wheat market remain tilted considerably further towards the bearish side of the equation.” Wheat stocks have built up “substantially” and the 2010-11 marketing year seems “virtually certain to be the third-largest production year of all time” behind the previous two marketing years.

The spring wheat crop in the U.S., for example, remains “overwhelmingly rated good-to-excellent,” the board said, with overall supply (production plus carry-in) now forecast to be almost five per cent greater than last year and U.S. total wheat supply in 2010-11 forecast near a billion bushels, “described by some as the biggest free stocks on record.”

Some wheats such as No. 3 and 4 CWRS and CW Feed remained flat in Thursday’s outlook, while most others were down $1 per tonne, such as No. 1 Canada Prairie Spring Red (now $181 per tonne, or $4.93 per bushel); No. 1 Canada Western Red Winter (CWRW, now $177); and No. 1 CW Soft White Spring (now $168).

Also, a new protein break for No. 1 CWRW at 11.0 per cent was launched at $182 per tonne ($4.95/bu.).

Tracking its price pace, the CWB noted Thursday it now has five per cent of its expected 2010-11 crop year deliveries priced and expects those deliveries to be about 25 per cent priced by the end of September.

“Unattractive”

New-crop durum, malting barley and feed barley PROs didn’t budge Thursday from May levels. No. 1 CW Amber Durum (14.5) remains at $195 per tonne ($5.31/bu.); No. 1 CW feed barley (Pool A) sits at $143 per tonne ($3.11/bu.); and Select CW two-row and six-row designated barley remain at $204 and $186 per tonne respectively.

“At this juncture, the durum supply-and-demand balance does not support a broad-based rally,” the CWB said of its durum outlook. Supply is expected to shrink year-on-year in 2010-11; total demand is also seen falling, but that depends on how much “quality-threatened” new-crop durum enters the feed grain market.

In the new-crop feed barley market “at this juncture, there is likely downside to barley production, given the continued abundance of moisture in key barley-production areas,” the CWB said. “The global barley marketplace remains characterized by abundance and a correspondingly unattractive price.”

Canadian malting barley quality and supply may take a hit due to weather conditions in 2010-11, while a drop in U.S. acres may further limit North America’s supplies. Offsetting those issues, however, are large EU stocks and expectations for an “abundant” new crop in the EU.

Old-crop Pool B

The CWB on Thursday also rolled out an unchanged PRO for 2009-10 No. 1 CW feed barley in Pool B, flat at $143 per tonne ($3.11/bu.).

“It is difficult to make the math work and show a price rationale to transport feed barley from the Prairie region to either coast and exceed the potential return in the domestic feed market,” the CWB wrote Thursday. “There is nothing on the horizon that will alter this reality.”

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