New-crop wheat falls further in CWB PROs

Large global stocks of milling wheat and durum have again pressured the Canadian Wheat Board’s price outlooks lower for the 2010-11 crop year.

The CWB on Thursday cut its monthly pool return outlook (PRO) values for all grades of milling wheat by $7 per tonne from March levels, and trimmed most durum values by $2 per tonne.

PRO values for 2010-11 malting barley and Pool A feed barley, and for 2009-10 Pool B feed barley, were unchanged.

Wheat prices are expected to remain constrained by large global stocks in the 2010-11 marketing year, with world production expected to exceed demand, the board said in its outlook Thursday.

“The net effect is that ending stocks are forecast to increase from 196 million tonnes to roughly 207 million tonnes.”

“Outside factors” both within and outside the ag commodity complex will continue to affect wheat going forward. Wheat prices are expected to get some direction from commodities such as corn and soybeans, and U.S. corn is “off to a tremendous start.”

Other factors brought to bear on wheat will include crude oil prices and the general macroeconomic climate, both of which “have tended to be positive,” the board said.

Crude oil prices are still over $80 per barrel and index funds and speculative commodity funds are still active in the wheat pits, cushioning the impact of bearish fundamentals on wheat futures, the CWB said.

Offsetting those positives is the Canadian dollar, which still hovers near parity with the U.S. greenback, which in turn remains strong against the euro, making European wheat more competitive in Asia and Latin America.

On the other hand, the CWB said, reports that China may allow its currency more leeway to “float” could bolster commodity prices.

The board noted it has just started pricing for the expected 2010-11 crop year deliveries of wheat, with less than one per cent priced. It expects its wheat pricing level to reach about 25 per cent by the end of September.

The $7 per tonne reduction in April 2010-11 PRO values leaves No. 1 Canada Western Red Spring (CWRS), 14.5 per cent protein, at $224 per tonne ($6.10 per bushel); No. 3 CWRS at $182 per tonne ($4.95/bu.); No. 1 CW Red Winter (CWRW) at $181 ($4.93/bu.); and CW Feed at $138 ($3.76/bu.).

U.S. durum supports

Durum beginning stocks worldwide are now expected to reach 7.4 million tonnes, five million of which are in the major exporting nations, offsetting an expected 2.7 million-tonne drop in world durum production, the CWB said. Global demand is expected to drop by 700,000 tonnes.

Canadian durum acres are expected to drop by near 25 per cent, the board said, but U.S. durum area is not expected to decline, due to government support programs that insulate U.S. durum growers from the market price.

The U.S. Department of Agriculture (USDA) released its loan rates Tuesday for all ag commodities, the CWB said, and the durum rate for North Dakota exceeded $6/bu., even though the current elevator price is just over $3/bu.

Thus, the board said, “a farmer in North Dakota, when deciding between durum and spring wheat (with a loan rate below $4/bu.), will continue to plant durum.”

Most durum grades listed in the 2010-11 PRO dropped $2 per tonne, with No. 1 CW Amber Durum (CWAD), 14.5 per cent protein, at $190 ($5.17/bu.); No. 3 CWAD at $164 per tonne ($4.46/bu.); and No. 5 CWAD down $7 per tonne at $138 ($3.76/bu.).

Domestic feed

The feed barley outlook for 2010-11 sees smaller supplies and strong domestic demand, which should support Canadian domestic prices and limit the availability of feed barley available for export, the board said.

Values for No. 1 CW Pool A feed barley for 2010-11 — and for No. 1 CW Pool B feed barley for 2009-10 — remain flat at $143 per tonne ($3.11/bu.) 

Reduced barley area in Europe and North America, meanwhile, is expected to help reduce malting-grade barley supplies by the end of 2010-11, the board said.

Canada’s Prairies have seen some moisture but need more rains to ensure a good supply of quality barley, the CWB said. Moisture conditions in Australia look better as some eastern Australian farmers begin seeding their barley..

Supplies in Europe will make European-origin malting barley “a significant competitive force,” the CWB said, while the weakness of the euro has pressured the Canadian-dollar price level that can be had in world markets.

Malting barley values remain flat in the April 2010-11 PRO at $200 per tonne ($4.35/bu.) for Select CW two-row and $182 ($3.96/bu.) for Select CW six-row.

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