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U.S. drought lifts CWB’s harvest PRO values

Values in CWB’s 2012-13 harvest pool return outlook (PRO) have risen on the expected demand for Canada’s wheat, barley and canola in the wake of the U.S. Corn Belt’s drought.

CWB’s second round of new-crop PROs, issued Friday, sees wheat and durum values up by $11 per tonne, malting barley up $10 and canola up $20 in the harvest pool compared to the previous PRO sheet on Aug. 3.

However, wheat is down $1, durum down $6 and malting barley up $3 in the early delivery pool’s outlook.

Wheat prices "have remained in relatively high price channels" based on the drought in the U.S. Corn Belt and Russia’s spring- and winter-wheat growing areas, on top of dryness in parts of Australia and fewer wheat acres in Argentina, CWB said Friday.

"While wheat exports in most traditional exporting nations are forecast to be lower year-on-year, U.S. exports are forecast to increase this year by five to seven million tonnes," CWB said. "Typically, a higher share of world wheat trade for the U.S. is positive for world wheat values."

On the other hand, a rising Canadian dollar — lately running at a 14-month high against the U.S. dollar — can cut into prospective pool returns, Winnipeg-based CWB said.

CWB’s early delivery and harvest pools are now about 10 and five per cent priced, respectively. Its wheat PROs reflect pool futures pricing activity to date, along with projected wheat futures prices on the Minneapolis and Kansas City grain exchanges — now seen at US$9.65-$9.85 and US$9.30-$9.50 per bushel respectively through May 2013.

"Canadian export basis levels have been pressured in recent weeks given harvest pressure, and the decline in export basis levels has been greater than expected," CWB added. "Should weather for the balance of the wheat harvest be favourable, CWB grade spreads will narrow overall."

CWB’s latest PROs for both the early delivery and harvest pool peg high-protein (14 per cent) No. 1 Canada Western red spring (CWRS) at $370 per tonne ($10.07/bu.), No. 1 CWRS (12.5 per cent) at $360 ($9.80/bu.), and No. 2 CW red winter (CWRW) at $332 ($9.04/bu.).

Durum

With good-quality crops expected, the world’s durum supply is "adequate" for this marketing year and durum is expected to remain a "follower" of spring wheat prices, CWB said. New-crop St. Lawrence durum prices for fall/early winter shipment are now over US$400 per tonne.

PRO values for both the early delivery and harvest pools are pegged at $351 per tonne ($9.55/bu.) for high-protein (13 per cent) No. 1 CW amber durum (CWAD) and $335 ($9.12/bu.) for No. 2 CWAD. CWB’s durum early delivery and harvest pools are just under 30 per cent and 15 per cent priced, respectively.

Malting barley

Drought in the U.S. Corn Belt has boosted both world and local demand for alternate feedgrains, and the rally in corn has also supported malting barley bids, CWB said, but noted prices have softened in response to lower nearby corn values. The CWB’s pools are less than 10 per cent priced.

Barley production south of the Equator "is still the key to determining price movement in international markets in the coming months," CWB said.

Both the early delivery and harvest PROs are pegged at $315 per tonne ($6.86/bu.) for Select CW two-row malting barley.

Canola

Drought and heat in U.S. soybean-growing regions, "disappointing" canola yields in Canada and increased demand for oilseed byproducts due to lower U.S. corn production are supporting soybean values, CWB said. The oilseed price structure could improve further if South America sees weather-related problems and "robust" Chinese demand continues, the grain firm added.

That said, Brazil and Argentina are now forecast to produce record soybean crops, CWB said, so soybean and canola futures show "an inverse" after January and March respectively.

The canola PRO, pegged Friday at $660 per tonne ($14.97/bu.) reflects canola futures values in the range of $640-$650 per tonne through May 2013, CWB said.

CWB PROs are no longer released according to a specific timetable, but when market conditions warrant.

Related stories:
CWB sets initials for pooled 2012-13 canola, Sept. 4, 2012
All Prairie grain handlers now CWB-compatible, Aug. 7, 2012
CWB announces initial payments, July 30, 2012

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