U.S. winter wheat woes boost CWB’s winter PRO

Wheat futures climbing up off their lows in late 2012 and early 2013, based mainly on the shape of the U.S. hard red winter wheat crop, have bumped up CWB’s winter PRO values.

The former Canadian Wheat Board on Friday released an updated pool return outlook (PRO) for its 2012-13 winter pools, with wheat values up $10 per tonne, durum up $6 and canola up $35.

U.S. HRW wheat crop condition ratings remain poor, and the crop remains prone to winterkill should it exit dormancy early, given its generally poor fall establishment, CWB said Friday.

"The lack of physical corn in the U.S. also suggests that strong wheat feeding will continue through to new-crop corn availability," CWB said in its outlook.

Looking ahead, CWB said, "the corn market is going to have the biggest say as to what happens to wheat prices, and recent strength in wheat futures has been tied to a stronger corn market."

Corn stocks remain tight in the U.S., CWB noted, and markets are "counting on a significant recovery in U.S. corn production to restore more comfortable stock levels," which means they’ll "remain more sensitive than usual to weather anomalies."

A $10 per tonne increase in 2012-13 winter pool wheat PRO values, compared to CWB’s Jan. 4 outlook, puts high-protein (14.5 per cent) No. 1 Canada Western red spring (CWRS) at $353 per tonne ($9.61 per bushel). No. 1 CWRS (13.5 per cent) is pegged at $349 ($9.50/bu.) and No. 2 CW red winter at $320 ($8.71/bu.).

Given current PRO assumptions, CWB said, farmers in its Futures Choice winter pool can now expect, for example, to get a final return for No. 1 CWRS 13.5 (in store port position) made up of the futures value they lock in plus $8 to $16 per tonne, depending on the futures month(s) in which they are pricing futures.

CWB’s durum PRO values, meanwhile, have picked up support from the prospects for reduced durum acres in both the U.S. and Canada, concerns about moisture deficits in North Africa, North African purchasing activity in recent weeks and a "slightly weaker" Canadian dollar.

With durum values up $6 per tonne in CWB’s winter pool outlook compared to Jan. 4 levels, No. 1 CW amber durum (13 per cent protein) now sits at $351 per tonne ($9.55/bu.) and No. 3 CWAD at $325 ($8.85/bu.).

Canola values in CWB’s winter PRO have gained, as markets begin to factor in more of the tightness of canola supplies as well as how much time remains until new-crop canola becomes available, CWB said.

Also, "the fact that corn is presently winning the battle for acres against soybeans in the U.S. likely means soybean prices need to strengthen over the next few months to compete, which in turn will be supportive of canola values."

CWB’s 2012-13 winter PRO for No. 1 Canada canola thus rises $35 per tonne from its Jan. 4 level, to $650 ($14.74/bu.).

The latest PROs assume the Canadian dollar at par versus the U.S. dollar, CWB said, noting the loonie has been trending weaker over the past few weeks.

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