Agro Perspectiva

Wheat Up Slightly in Latest CWB PRO for 2009-10

23.07.2010 13:19 "Agro Perspectiva" (Kyiv) — Wheat and durum values were both higher in updated 2009–10 Pool Return Outlooks (PROs) released today by the Canadian Wheat Board. Wheat values climbed $1/ tonne for all grades and classes from the last 2009–10 wheat PRO, released in May. Durum was up between $1 and $4, depending on grade and protein level. Malting barley was down $1 from the previous PRO, while feed barley was unchanged from its last outlook in June. With the change, the average expected pool return for No. 1 CWRS (13.5% protein) inches up 2 cents from May to $6.42/bu (I/S Vancouver or St. Lawrence), while No. 1 CWAD (13%) climbs to $5.47 from $5.36. For malt barley, the average expected pool return for two-row slips to $4.53 from $4.55 and 6-row falls to $4.14 from $4.16. At the time of today’s PRO, the CWB had priced approximately 96% of the expected 2009–10 crop year deliveries of wheat.As the marketing year comes to an end, the world wheat market remains heavy with supply. The latest U. S. Department of Agriculture World Agricultural Supply and Demand Estimate (May) forecasts 2009–10 global wheat production at 680 million tonnes. This represents the second-biggest production after the 683-million-tonne world wheat crop of 2008–09. The current estimate for world ending stocks sits at 193 million tonnes, a 38-million- tonne increase over carry-in stocks. An extended weather market has impacted futures to the upside over the past three weeks. Due to 2010–11 production uncertainty persisting well into the summer, there has been some late marketing-year strength in the wheat market. Most notably, production difficulties in Russia and Kazakhstan have left some traders short, requiring intensified efforts to find coverage ahead of delivery dates. This has offered some strength to offshore cash markets. However, as of yet, little of this business has allocated itself to North America which, although improved, remains priced out of the nearby base-grade wheat market. Broader economic markets have stabilized over the last month. However, stability is a different environment than recovery. Overall economic indicators remain mixed and there is still apprehension that the world economy could trend down. Investors remain wary, but relatively flush with cash. Rallies such as the recent one in the wheat pits stimulate some cash inflow, which further increase the technical run-up. Fundamentals strongly suggest that nearby wheat prices have room to move down. Foreign exchange rates remain a pivotal determinant of overall farmgate returns. The Canadian dollar has traded within a four-cent channel since the May 2009–10 PRO. Of course, this late in the marketing year, the bulk of the wheat pool has been priced, so the impact of currency fluctuations (even when seemingly beneficial to Canadian-dollar farmgate returns) is limited.