CWB’s first 2010-11 PRO shows price pressures

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Published: February 23, 2010

Large global wheat stocks and stagnant demand for barley are dragging on the Canadian Wheat Board’s first pool return outlook (PRO) for the 2010-11 crop year.

The CWB released the PRO, its first estimate of returns for the 2010-11 crop year, on Monday during its GrainWorld conference in Winnipeg.

Hgh-protein spring wheat (No. 1 CWRS, 14.5 per cent) was valued at $245 per tonne ($6.67 per bushel); high-protein durum (No. 1 CWAD, 14.5) at $202 per tonne ($5.50/bu.); No. 1 CW feed barley at $150 ($3.27/bu.) and Select CW two-row barley at $208 ($4.53/bu.).

“Global wheat prices are expected to face continued pressure from large global stocks in the 2010-11 marketing year,” the CWB wrote. “Although wheat production is expected to decline in 2010-11, the drop in production is not expected to result in a significant change in stocks.”

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Global wheat acres are expected to dip slightly in the coming year due to lower price, as are Canadian wheat acres due to competition from other crops.

Exchange rate fluctuations are also expected to add volatility to the PRO, the CWB said, noting the Canadian dollar has appreciated by about 18 per cent over the past year.

For the 2010-11 pool year, the CWB noted it has categorized Canada Western Soft White Spring (No. 1 and 2 CWSWS) into two protein bands: below 10.5 per cent, and 10.5 per cent and up. For 2009-10, the CWB has three protein bands for No. 1 and 2 CWSWS: below 9.9, 9.9 to 10.8 and above 10.8 per cent.

Durum stocks of the major exporters in 2009-10 are now forecast to reach 5.1 million tonnes, the largest since 2005-06, the CWB said. “U.S. and Canadian durum area is expected to be sharply lower in 2010-11, but increased stock levels will keep total supplies at similar levels to 2009-10.”

International barley production is forecast to decline 3.5 per cent from last year. Ending stocks are shrinking, but not to levels that would be considered tight, the CWB said.

Domestic feed demand is expected to remain stable, likely resulting in offshore prices that are lower than domestic. These market conditions will limit Canadian exports, the board predicted.

Canada, U.S., Europe and Australia are all forecast to have lower production of designated (malting) barley, the CWB said. “Uncertainty around demand recovery, a large European carry-in of good quality barley and a weakening euro equate to a slightly lower price outlook in 2010-11.”

Price pace

The board recently noted that its PROs will now also include figures around the percentage of its wheat pool that’s already been priced. Those figures will include a mix of sold grain and the CWB’s futures position — meaning that the “per cent priced” is not the same as “per cent sold.”

For its first 2010-11 PRO, however, the CWB noted it has no grain priced yet for its expected 2010-11 crop year deliveries of wheat. The board said it currently expects its wheat pricing level to reach about 25 per cent by the end of September.

Board wheat is priced on a pace that’s approved annually by the CWB’s board of directors. Futures and options markets are used to moderate faster or slower cash sales to make sure pricing follows that pace, the CWB said.

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