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Canada Wheat Production Remains High

Canadian and American farmers will produce significantly less wheat in 2009 as part of an expected global reduction in wheat production, the Canadian Wheat Board said Monday.

The CWB expects Canada’s all-wheat production to drop by 16 per cent, or 4.7 million tonnes, to 23.9 million tonnes in 2008. U. S. wheat production will drop about 15 per cent, or 10.1 million tonnes, to 57.8 million tonnes, said the CWB.

“It’s especially difficult (to forecast) this year with the global situation we’re in,” said David Boyes, the CWB’s commodity risk manager, at the board’s annual GrainWorld conference.

But Boyes predicts the world will produce up to 50 million tonnes, or seven per cent, less wheat this year, down to 633 million tonnes from last year’s world record 683 million tonnes. That would still be the highest production in at least 10 years.

Weakening wheat prices have resulted in a smaller wheat area in most major growing areas of the Northern Hemisphere, the CWB said in its first major forecast for the 2009-10 crop year, which begins Aug. 1. Winter wheat crops in China and the Middle East are suffering from early-season drought.

With the livestock industry hard hit by the economic crisis, there will be a slide in demand for wheat used as animal feed, Boyes said. That may be partially offset by expected continued high import demand by millers, he said.

“Milling wheat demand is fairly inelastic,” Boyes said. “We learned in 2007-08 when we had the really high prices that sure enough prices could double or triple and people were still willing to pay them.”

The CWB’s pool return outlook (PRO) forecasts lower prices for its classes of wheat and durum from the most recent January outlook. But the PRO released Monday is still the third-highest outlook the CWB has released since it began issuing them in the 1980s.

The price of Canada Western Red Spring wheat 13.5 is expected to decline $18 to $289 per tonne from $307 in the most recent outlook. Western Amber durum 13.0 is forecast to drop more steeply, by $57 to $303 per tonne from $360. That’s because durum rose more quickly in value and had further to fall, Boyes said.

“From a historical perspective, these prices are holding up.”

The board expects the durum-seeded area to shrink nine per cent in Canada and 11 per cent in the U. S. Those areas are generally dry and need spring rains, Boyes said.

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