Wheat exports hit the roof

Canada set a new weekly wheat export record in week 40 of the 2019-20 campaign, according to the Canadian Grain Commission.

Terminal elevators shipped 926,000 tonnes of wheat and durum, shattering the previous record of 691,000 tonnes set the same week the previous crop year.

“We had the demand in place, we had the mechanism to get it to the customer in place and we had the product,” said Wade Sobkowich, executive director of the Western Grain Elevator Association.

“With those three stars aligning, I guess we hit a record.”

Exports came back down to earth on week 41 with terminal elevators shipping out 432,400 tonnes of wheat and durum.

If Sobkowich had to identify one factor that caused the stars to align in week 40 it would be COVID-19.

Wheat demand is stronger than usual this spring as importing countries bolster their stocks of the commodity to ensure there is enough bread to feed their citizens.

Perhaps a bigger factor is that Canadian grain companies finally have the rail capacity they require to get their product to market because there are less forestry and oil and gas products competing for rail cars due to COVID-19.

And there is plenty of wheat in the system due in part to winter disruptions caused by strikes and blockades.

Cam Dahl, president of Cereals Canada, said the week 40 numbers are staggering.

“I’m really happy to see this kind of movement,” he said.

“It’s good for farmers and it’s good for agriculture.”

But he laments that the fluid movement is occurring during the spring instead of the peak price period of November through January when there were significant rail disruptions.

He characterized demand as strong but not unusual. It is more about improved logistics than anything else.

MarketsFarm analyst Bruce Burnett said one reason for the strong spring demand is that Australia is largely out of the market for the second year in a row due to drought.

“There is some demand out there that obviously we’re covering,” he said.

Burnett also noted that there has been really strong movement out of Thunder Bay due to low bulk freight rates and high lake levels.

Any time there is strong demand off both coasts and no restrictions on the ability to service that demand it bodes well for export volumes.

And it’s not just wheat that is moving. Other crops like canola are benefiting from freed-up rail capacity.

Burnett believes that will be the case right through the end of the 2019-20 crop year.

Wheat shipments are 1.3 million tonnes behind last year’s levels due to the poor winter program but he thinks they could catch up by week 52.

Canola exports are 944,000 tonnes ahead of last year’s pace due to improved sales to places like the European Union and United Arab Emirates. Burnett thinks that gap will widen as the rest of the crop year unfolds.

However, ending stocks of both commodities won’t be particularly tight due to ample supplies of the crops.

Sobkowich said it is a fair assumption that wheat exports could catch up to last year’s levels, depending on demand and the continued ability to move the crop.

His concern is that the railways historically prefer to have less capacity than demand so they can have 100 percent asset utilization to maximize operating ratios.

“What are their plans?” he said.

“Are they seeing a long-term drop in demand that would prompt them to make the business decision to start removing capacity?”

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