PROs Increase Despite Bearish Market – for Jul. 29, 2010

Wheat values in the Canadian Wheat Board’s July 2010 Pool Return Outlook (PRO) for the 2010-11 crop year are up between $6 and $14 per tonne from last month. Durum is up $13 to $14 per tonne and malting barley has increased by $10 to $11 per tonne. Feed barley values remain unchanged from June.

In its analysis, the CWB said wheat futures have increased substantially since last month. However, wheat fundamentals at the end of the 2009-10 marketing year remain bearish. According to the U. S. Department of Agriculture (USDA), ending stocks are estimated at more than 193 million tonnes, an increase of 28 million tonnes over the previous year. Total global production of 680 million tonnes is the second-largest on record.

Mitigating the losses in Canada, Russia and Kazakhstan are the largely favourable conditions in U. S. Hard Red Winter and Hard Red Spring growing areas. The CWB said that U. S. ending stocks, already large at the end of 2009-10, are set to increase by a further 120 million bushels (3.26 million tonnes) to 1.093 billion bushels (29.75 million tonnes).

“This most likely represents the largest free stocks (as in stocks accumulated without benefit of direct government incentive) of all time,” the CWB said.

The CWB said supply of durum remains adequate for anticipated 2010-11 demand. Western Canadian production is forecast to be roughly three million tonnes, down from 5.5 million tonnes the previous year. World production is forecast down 3.2 million tonnes, so the bulk of the change is centred in Canada.

The malting barley price outlook has improved in part due to the weather conditions in Western Canada, the CWB said. U. S. acreage is down year on year, further limiting the overall malting barley supply in North America. At the same time, a heat wave has reduced the crop in Russia and Kazakhstan. In the EU, winter crop yields and quality have been disappointing, with recent EU weather patterns focusing concern on quality potential for spring barley.

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