Economic anxiety in Europe aside, the global supply-and-demand picture for wheat and barley is hanging heavy on the Canadian Wheat Board’s October pool return outlooks (PROs).
Wheat values in the 2011-12 PROs released Thursday are down $10-$20 per tonne from September levels, while durum values are down $13, malting barley values are down $18-$19 and feed barley values down $17.
The new PROs don’t yet factor in the fallout from a reported agreement Thursday by leaders in the European Union to limit damage from the economic crisis in the euro zone, the CWB noted.
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The details aren’t yet worked out for the EU deal but “there remains considerable skepticism in the market about the effectiveness of the agreement,” the board said in its PRO commentary, and there remain “legitimate concerns that capital inflows for commodity markets could suffer.”
After Thursday’s deal was announced, the Canadian dollar was seen gaining on the U.S. dollar but losing ground to the euro and Australia’s dollar, the CWB said. A stronger loonie against the U.S. dollar is “generally negative” for Canadian-dollar pool returns, while a stronger euro and Australian dollar against the loonie is “generally positive.”
Wheat, durum
October’s wheat PROs reflect pressure from “longer-term supply-and-demand balance issues,” the CWB said, noting the U.S. Department of Agriculture’s latest round of world supply and demand estimates on Oct. 12. The USDA reported 2011-12 wheat ending stocks of 202 million tonnes worldwide, or a 30 per cent stocks-to-use ratio, while world wheat production for 2011-12 is seen at 681.2 million tonnes, the third-largest crop on record.
Large-scale exports are expected from the Black Sea region (Russia, Ukraine, Kazakhstan) and crop conditions in Australia are now “favourable for both large volumes and high quality,” the CWB said.
The net result in Thursday’s PROs is a $17 per tonne drop in value for No. 1 Canada Western Red Spring wheat (14.5 per cent protein) at $316, with No. 1 CWRS (11.5 per cent) down $18 at $276, No. 1 CW Red Winter (11 per cent) down $18 at $252, and CW feed wheat down $20 per tonne at $216.
The CWB as of Thursday had priced about 30 per cent of its expected 2011-12 wheat deliveries and expects to have priced about 50 per cent by the end of December.
Durum prices, meanwhile, are down in “lock-step,” the CWB said, but overall, those prices remain “historically high” and should encourage more seeded acres in the longer term.
Buying demand for durum “remains strong” in the Mediterranean basin — and a stronger euro, compared to September values, “has had the dual effect of reducing EU competitiveness and increasing their buying power for North American durum.”
Values for CW amber durum (CWAD) are mostly down $13 per tonne in the October PRO, with No. 1 CWAD (14.5 per cent protein) now at $402, No. 2 CWAD (11.5 per cent) at $370, and No. 4 CWAD at $268. No. 5 CWAD is down $20 per tonne at $216.
Barley
Australian exporters are now “aggressively marketing” what’s expected to be a large, good-quality malting barley crop, and Argentina is set to follow suit by the last half of November, the CWB said.
However, given the United States’ smallest barley crop since 1936, “increased import demand will keep North America a high-priced island for the remainder of the year.”
The October PRO for Select CW two-row malting barley now sits at $322 per tonne, down $19 from September, while Select CW six-row has dropped $18 per tonne, to $306.
Feed barley values, meanwhile, are expected to continue a “slow decline” as new production comes onto the market. Domestic values in Western Canada, meanwhile, show some support from smaller barley production and less availability of feed wheat.
Weaker international values and stronger domestic values “will limit opportunities to market feed barley onto the international market,” the CWB said. Its Pool A PRO for No. 1 CW feed barley now sits at $235 per tonne, down $17 from September.
The CWB’s next pool outlook for 2011-12 is due out Nov. 24.
