The CWB has released its April 2009 Pool Return Outlook (PRO) for the next 2009-10 crop year. Wheat values are lower by $14 per tonne from last month for all grades and classes except CW Feed, which is down $6. Milling durum is lower by $15 per tonne, while malting barley has declined by $7 from the March PRO. Pool A feed barley is down $5 per tonne.
For a full list of PROs visit the CWB website.
U.S. wheat futures have remained extremely volatile throughout the month of April. For example, since the last PRO, Minneapolis wheat futures traded in a range of $0.67 per bushel. Wheat futures in the U.S. continue to receive spill-over support from strong soybean prices. Concerns about Argentine soybean supplies combined with strong demand from China, have significantly strengthened U.S. soybean futures. International wheat values were mixed this past month. European and Australian values held steady while Black Sea values were supported by strong government intervention prices.
Over the last month, basis levels for spring wheat have also weakened significantly on relatively weak demand, although they still remain above the long-term average. Wheat fundamentals remain relatively unchanged from last month despite improved global crop prospects. The International Grains Council forecasts world wheat production at 651 million tonnes, a decline of 36.5 million from last year.
A large carry-in of global wheat stocks will result in the total world wheat supply for 2009-10 increasing, which continues to weigh on the price outlook. Crop prospects in the Black Sea region are favourable, with little winterkill and good yield potential. European crop conditions have also been favourable so far this growing season. In the U.S., dryness and possible frost damage in the southern plains have caused concern for the Hard Red Winter wheat crop. Cool and wet conditions in the northern plains have slowed spring-wheat planting.
The outlook for the Canadian dollar remains very uncertain. At this time of the marketing year, the forecast for the dollar has a significant effect on projected returns for the 2009-10 crop. Over the last month, the general trend has been stronger, but with historically high day-to-day volatility. The dollar has fluctuated between $0.79 U.S. and $0.83 U.S. since the last PRO. Ocean freight rates have decreased this past month and are expected to remain at levels significantly lower than the historically high rates of the past two years.
The nearby durum market has shown some strength on limited trade over the past month, supported by strong demand from millers. The outlook for new crop remains bearish due to favourable crop conditions in North Africa and strong new crop exports from Mexico. Beneficial rainfall in North Africa maintained good crop conditions during the critical reproductive growth stage. Global durum production is still expected to decrease slightly from 2008, falling just below the five-year average.
Durum production in the European Union (EU) should fall about 20-per-cent short of its total durum usage which will increase imports to the EU significantly this year. Production in North Africa is forecast to increase about 75 per cent from last year, reducing the region’s import needs to the lowest level since the mid 1990s. The 2009-10 durum crop in the U.S. is expected to be slightly smaller than the 2008-09 crop but, with larger carry-in stocks, total supply is projected to be higher, which will add pressure to prices in early summer.
Global barley production is forecast to decrease three to five per cent. Barley production in the U.S. is forecast to decrease by 10 per cent in 2009. However, large carry-out stocks in 2008 will increase supplies year-on-year. Barley production in Canada, the EU and Black Sea is forecast to decrease, while production in Australia and Turkey will increase. Global feed-barley supplies will be adequate in the new crop year as consumption is forecast to decline. Lower freight rates and an increased Canadian dollar narrowed the spread between U.S. corn and western Canadian feed prices this month. Despite this narrowing, domestic barley is still very competitive when compared with corn. World price direction will be influenced by corn and the amount of barley substitution that occurs.
Spring barley prospects remain favourable. Adequate rainfall and above-normal temperatures in the EU have advanced the development of the winter barley crops in Germany and spring field activities across northern Europe. The spread between malting-quality barley and feed barley has narrowed and should remain at more traditional levels in the upcoming crop year. Demand for malting-quality barley is expected to improve slightly from 2008-09.