Wheat values will continue to rise as customers come to face the facts of a disappointing 2010-11 crop year, the Canadian Wheat Board says.
And those rising values translate to increases of $5 to $19 per tonne for milling wheat and $3 to $17 for durum in the CWB’s latest pool return outlook (PRO), released Thursday.
Barley values, by comparison, rose only slightly in the CWB’s new 2010-11 PRO, with malting barley and pool A feed barley both up $2 per tonne, and pool B feed barley up $10 per tonne.
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In terms of wheat, “demand has become the focal point now that the final 2010-11 wheat harvests are essentially complete,” the board wrote in its outlook Thursday.
“The world now has to come to grips with the fact that, in terms of quantity and quality, 2010-11 was a disappointing year. Countries that have yet to fulfill their marketing year wheat demand will find it harder to locate the type and volume of wheat they require.”
The result, the CWB said, is that wheat prices “have risen and will continue to rise to either curb demand or pull the wheat out of locations that require the extra motivation to market their wheat.”
World wheat ending stocks may appear relatively large at 178 million tonnes, compared to 125 million at the end of 2007-08, but the current stocks “are not widely distributed,” with 62 per cent accounted for by China, India, the EU-27 and the U.S., up from 53 per cent in 2007-08.
With China and India maintaining state-sponsored strategic stockpiles with eyes on both food security and inflation rates, “the more supportive an otherwise large stocks number is towards wheat prices.”
The largest increases in the January PRO values compared to December’s go to high-protein, top-quality grain, with No. 1 Canada Western red spring (CWRS), 14.5 per cent protein, up $19 at $374 per tonne ($10.18 per bushel).
Values also rose on lower grades, with No. 4 CWRS up $12 at $255 per tonne ($6.94/bu.), but CW Feed up just $5 per tonne at $240 ($6.53/bu.).
Durum
Similarly, the CWB said Thursday, “the market has finally realized that the supply of durum is tight.”
Limited supplies of higher-quality durum in both Canada and the U.S. will challenge customers trying to meet certain quality specs until new-crop supplies are available from Arizona and California, the board said.
“The end result is that there will be very little higher-quality durum carried forward to 2011-12, which will support the maintenance of the high spreads between high- and low-quality durum.”
Such spreads become clear in the January PRO values, with No. 1 CW amber durum (CWAD), 14.5 per cent protein, up $17 per tonne at $314 ($8.55/bu.). Nos. 3, 4 and 5 CWAD are up by $13, $8 and $3 per tonne respectively from December levels, with No. 3 CWAD at $260 ($7.08/bu.), No. 4 at $244 and No. 5 at $233 per tonne ($6.34/bu.).
Barleys
“The malting barley market this year has been a tumultuous one, with harvest quality wrecks in three regions,” the CWB said. The biggest buyer, China, has instead shown “incredible resistance” to buying malting barley as prices began rising.
China, the CWB said, “may have enough barley to cover its demand this year, but will be eager for the next crop of barley to come off in Europe this fall.”
Maltsters everywhere are expected to be “running on fumes” by harvest and will require new-crop barley as soon as it’s available, the CWB said. “Any serious production and/or quality issues in a major growing area could cause a spike in prices and the premium over feed. Meanwhile, firm feed barley values will provide a floor for malting barley.”
Expected Saudi Arabian demand for feed, meanwhile, coupled with prospects of another year of small world barley production, give feed barley prices a “favourable outlook moving forward,” the board said.
Furthermore, “tightness in other feed grain supply and demand, like U.S. corn, will provide support to the price structure as well throughout the rest of 2010-11 and into 2011-12.”
Select CW two-row and six-row malting barleys are up just $2 per tonne from December levels, the CWB said, at $254 and $237 per tonne ($5.53 and $5.16 per bushel) respectively.
No. 1 CW feed barley (Pool A), was also up just $2 at $234 per tonne. Pool B, for which the CWB’s initial payment of $130 per tonne was announced on Tuesday, is up $10 at $235 per tonne ($5.12/bu.).
The CWB’s next PRO is due out Feb. 24.
