Bad weather – preferably elsewhere – is Prairie farmers’ best bet for a wheat market rally this year, the Canadian Wheat Board’s director of weather and crop surveillance unit told farmers attending Manitoba Ag Days Jan. 20.

“We’re going to need a weather event in one of those big six (exporting) countries to turn the wheat market from trading neutral and maybe dipping to increasing prices again,” Bruce Burnett said.

Burnett said India is already suffering the effects of a failed monsoon, but markets have already factored that in. Eyes will soon turn to Australia, which is vulnerable to the effects of the ongoing El Nińo effect.

While demand has remained relatively strong for wheat in the world, despite the global recession, two record crops in a row have created surplus supplies.

Projected global wheat production is 644 million tonnes

this year, largely due to declining acreage in key growing areas. That is lower than the 676 million tonnes the world produced in 2009 and 682 million tonnes produced in 2008. However, it is still enough to meet the projected demand.

Burnett said the relative strength of the Canadian dollar against U. S. currency will further cut into farm gate returns. On a brighter note, he said he doesn’t believe, based on historical charts, that it will face further devaluation.

Meanwhile, the price of oil has bounced back to the $80-per-barrel range, and Burnett suspects that market will continue to be strong, which increases the value of agricultural commodities and the attractiveness of biofuels produced from grains.

Burnett was also cautiously optimistic that U. S. corn prices, which factor into Canadian barley values, will find support from the growing U. S. ethanol sector despite recent USDA data that pegged last year’s crop a record.

Ethanol is expected to overtake livestock as the largest single domestic user of corn in the U. S. within two years. “Despite prices getting hammered this past week, the fundamentals for corn are really quite neutral,” Burnett said.

However, he cautioned the outlook isn’t bright for barley, given the current state of Canada’s livestock sector. “Without a vibrant livestock sector, it’s going to be hard to get prices up,” he said.

The pulse outlook is the most encouraging, with strong demand and good prices. The oilseed outlook is neutral, with good demand but large supplies.

In his market outlook, ProFarmer Canada analyst Mike Jubinville seems firmly between the bulls and the bears. Jubinville is predicting prices will follow a sideways trend for much of 2010.

Higher supplies of key commodities, in fact a U. S. corn crop that unexpectedly broke the previous record, and growing stocks of wheat, are curbing upward market movement.

Meanwhi le, cont inued demand from Asia, the ethanol industry and robust speculative interest in commodities by non-traditional investors, are underpinning markets on the downside.

Jubinville acknowledges the current market scenario is a far cry from the unprecedented prices farmers saw 18 months ago, but he said many of the fundamentals underpinning that market surge remain in play.

“A lot of the issues affecting the markets at that time are still underlying the markets today,” Jubinville said. The problem is, so are a lot of other political, macroeconomic and supply factors that are adding a bearish tone to trade. Trade disruptions due to the discovery of genetically modified flax in Canadian shipments and salmonella in canola meal is hampering trade, which also has an effect on prices, he noted.

The U. S. dollar is struggling to hold its value, largely due to the huge injection of cash the U. S. Treasury pumped into the marketplace last year in a bid to prop up the financial system. Jubinville said analysts have determined the amount of greenbacks the U. S. printed and distributed is higher than all of the civil and offshore wars that country has fought in since Independence.

As well, supplies have grown and the recession has limited demand growth in certain key markets.

Jubinville said farmers’ best selling opportunities could well be to watch for basis “carrots” companies offer when trying to draw stocks into the system.

As well, he advised against farmers panicking and rushing into the market to sell off commodities such as oats at the first sign the market is falling. “Let’s not chase this thing down when it is testing its downside,” he said. “Now is not the time to go chasing the oat market.” [email protected]