New-crop PROs way up on “serious supply concerns”

“Substantial market changes” in the world wheat complex and barley fundamentals have spurred major increases right across the Canadian Wheat Board’s latest new-crop pool return outlook (PRO).

The “entire wheat complex” including futures and world cash prices has risen due to “serious supply concerns,” the CWB said in its new outlook Thursday, which in turn has boosted PRO values for 2010-11 wheat by up to $53 per tonne, depending on class, grade and protein level.

And Canadian feed barley has also stepped back into the world market, the CWB notes. The crop’s values have “surged” and raised the new-crop PRO value by $66 per tonne from the July level.


With global fundamentals “now at their most bullish in several years,” PRO values for No. 1 Canada Western Red Spring (CWRS) at 14.5, 13.5 and 12.5 per cent protein are up $53 per tonne from their July levels, to $290 ($7.89 per bushel), $278 and $263, respectively (all values in-store Vancouver or St. Lawrence).

No. 1 CW Red Winter is also up $53 from July levels, at $237 per tonne ($6.45/bu.), while No. 4 CWRS is up $52 per tonne, at $220. Feed-grade CW wheat is up $33 per tonne at $185.

The CWB as of Thursday has priced about 18 per cent of its expected 2010-11 crop year deliveries of wheat, and said it now expects a pricing level of 50 per cent by the end of December.

The start of the 2010-11 marketing year had seemed “decidedly bearish,” the CWB recalled, and “at least one major weather-related crop problem was needed to shift wheat fundamentals from bearish to bullish.” Growers with wheat to sell now have two significant wheat-related weather problems: excessive moisture on Canada’s Prairies, and Russia’s drought.

Most significantly, Russia’s wheat production is now forecast at 44 million tonnes, down more than 15 million from 2009-10, with the spring wheat harvest expected to be just half of what it was last year.

As a result, the Russian government, starting Aug. 15, barred exports of grain until at least the end of this calendar year. And given “weather-related adversity” in both Ukraine and Kazakhstan, total wheat exports from the major former Soviet Union nations are now forecast at 18 million tonnes below the 2009-10 level, the CWB said.

The U.S., meanwhile, is “well-positioned to fill the gap left by the Russian absence in the wheat export market,” the CWB said. “In years where the supply from elsewhere is compromised, demand shifts to the U.S. This generally has a very positive effect on prices.”

All that said, the CWB warned Thursday, “continued weakness in the world’s major economies has added to volatility and is a dark cloud over the entire market.

“The nervous energy in the investment markets has created volatility, as money seeks both safe haven and opportunity.”

Feed barley

For the first time in a while, Canadian feed barley has entered the world market, the CWB said, as offshore values are now more attractive than domestic prices and Canadian barley will have a chance to move in volume internationally.

Thus, the August 2010-11 values for No. 1 CW feed barley (Pool A) sit at $209 per tonne ($4.55/bu.), up $66 from July.

Russia’s drought and grain export bans have had a “major impact” on barley fundamentals, as have drought-related decreases in Ukrainian production, cutting Saudi Arabia’s ability to source its barley needs from the Black Sea region, the CWB said.

Internal European Union barley prices have “soared” and pushed up the EU exportable price levels, the CWB said, and an overall surge in world feed barley values is the end result.

“The question going forward is whether the price increase will be sustained or temporary,” the CWB warned Thursday. “There is little doubt that Saudi Arabia needs feed barley, but a decision by the EU to release barley from intervention would go a long way to alleviating their supply concerns.”

Also, the CWB said, it’s still not known how much the “relative cheapness” of corn and dried distillers grains (DDGs) in nearby positions will displace barley demand.

Malting barley

Malting barley’s price outlook has improved along with the broader grain complex, but also on “quality issues” in the EU, the CWB said.

New-crop CWB PROs are up $46 per tonne from July levels, with Select CW two-row and six-row barley at $260 and $243 per tonne ($5.66/bu. and $5.29/bu.), respectively.

Malting barley production on Canada’s Prairies “remains uncertain” thanks to smaller acreage and excessive rainfall, the CWB said. Finishing conditions will play a central role in determining Canada’s overall supply.

All that said, “reduced quality prospects in the Northern Hemisphere have focused attention on Australian malting barley potential,” the CWB said. “The depth and quality of Australian malting barley will provide a market direction towards the end of the calendar year.”


Fundamentals in the world durum market remain “largely unchanged, apart from an increased Canadian production estimate,” the CWB said, but the worldwide durum complex has had a “substantial boost” from Russia’s drought.

The CWB’s 2010-11 PROs for durum show No. 1 CW Amber Durum (CWAD), 14.5 per cent protein, at $248 per tonne ($6.75/bu.), up $40 per tonne from July levels. No. 2 CWAD (11.5 per cent) is up $41, at $233 per tonne, while No. 5 CWAD is up $33 per tonne, to $185 ($5.03/bu.).

Demand remains the most bullish factor in durum, the board said. “Overall coverage is relatively high for this time of year and, as long as millers in North America, North Africa and the EU continue to extend their coverage, durum prices should remain strong.”

The board expects to release its September 2010-11 and 2009-10 PROs on Sept. 23.

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