The Canadian Wheat Board is predicting generally higher wheat and durum prices for the upcoming crop year, the result of a tighter global supply- and-demand balance.
Pool return outlook (PRO) prices for most wheat classes are up from the previous year’s PROs, according to the CWB’s first pool return outlook for 2011-12 released Feb. 28 during its annual GrainWorld conference in Winnipeg.
PRO prices for durum are significantly higher in all classes.
The 2011-12 PRO for 1 CWRS 12.5 wheat is $335 per tonne, compared to $326 per tonne for the latest February 2010-11 PRO, which was published last week.
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1 CWRS 11.5 is at $321 per tonne, up 11 per cent from $310 the previous year. 3 CWRS is at $304 per tonne, 24 per cent higher than the 2011-12 February PRO of $280 per tonne.
Durum prices are also noticeably higher. The 2011-12 PRO puts 1 CWAD 14.5 durum at $383 a tonne, up from $319 a tonne. 1 CWAD 13 is at $374, up significantly from $319.
All other durum classes are up, too, with increases ranging as high as 70 per cent.
Tighter world wheat supplies in the 2011-12 marketing year are a main driver for stronger grain prices, the CWB said.
World ending wheat stocks remain quite large at over 175 million tonnes. Global production is estimated at 653.5 million tonnes, seven million tonnes higher than in 2010-11. But supplies are expected to drop by 15.2 million tonnes because of lower carry-in stocks.
Wheat demand is estimated at 660 million tonnes, five million tonnes lower than 2010-11 demand estimates.
“Given that a change in stocks – in terms of direction and magnitude – is the most prophetic variable for the future course of prices, early indications for 2011- 12 suggest continuation of historically strong wheat prices,” the CWB said in its PRO commentary.
Durum market factors in 2011- 12 are also bullish, according to the board.
Neil Townsend, a CWB market analyst, said global durum production is forecast to be slightly higher than in 2010. But durum usage is forecast to be larger than production for the second year in a row. Durum trade is expected to be flat and North American stocks are tipped to decline by another 30 per cent by June 2012 – something Townsend called “an extremely bullish factor.”
But Townsend cautioned that markets are volatile and different scenarios could play out.
The market situation could be a repeat of 2006-07, when prices spiked. Or it could be like 2007-08 when prices shot up, only to fall back, he said.
“If our current situation is akin to 2007-08, then expect to see peaks sometime in the next two to four weeks,” Townsend said.
“If our current situation is akin to 2006-07, then this is merely table setting and the peaks will be sometime in 2011-12, and the highs could be markedly higher than the current context.” [email protected]
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“Ifourcurrentsituation isakinto2007-08,then expecttoseepeaks sometimeinthenext twotofourweeks.”
– Neil Townsend, Cwb Market Analyst
