The 2001-02 crop brought farmers disappointing returns, and the 2002-03
crop probably won’t make up for it, say many market analysts.
“So far we’ve seen very little price response from tighter
fundamentals. Will that trend continue in 2002-2003?” asked Canadian
Wheat Board market analyst Dwayne Lee during the Grain World conference.
Lee then charted a number of reasons the CWB feels higher prices are
unlikely, and released the board’s first pool return outlook for the
2002-03 crop year.
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The CWB’s analysis of the world wheat situation was similar to one
released by the United States Department of Agriculture on Feb. 22.
“The stage was set in 2001-02 for strong U.S. wheat exports and higher
U.S. and world prices,” said USDA chief economist Keith Collins.
“Yet this season’s U.S. wheat exports are expected to be the smallest
in five years with prices below $3 US per bushel again. Wheat missed an
opportunity …. Looking ahead at 2002-03, another opportunity like the
past year for wheat is unlikely.
“The world wheat market is likely to be brutally competitive in
2002-03.”
The Canadian Wheat Board is estimating fairly steady wheat prices but
weaker values for durum.
In 2001-02, wheat prices were held in check by small wheat exporters
who were able to fill the market shortages that major exporters were
beginning to ration, said Germain Denis, executive director of the
International Grains Council, during the Grain World conference.
“You even have India and Pakistan (exporting wheat now),” said Denis.
“You have Russia, Kazakhstan and Ukraine. The (small exporters) have
about 20 percent of the world market They have become a significant
force in the world grain market.”
Lars Hoelgaard of the European Commission said buyers these days aren’t
as likely to be spurred into a buying panic by historically low
stocks-to-use ratios. That is another factor that stopped prices from
taking off last year.
“In the past (the present stocks-to-use ratio) would have resulted in
increases in prices, but what we’re seeing now, what the trade is
telling us, is that because of the move away from state trading
enterprises on the importing side … that this practice of buying up
and holding stocks as we saw in the past isn’t the behaviour now.”
Lee said the 2001-02 market was a product of tighter global wheat
stocks especially in a number of major exporters, stronger import
demand in some areas, a quality North American crop with high protein,
but slow U.S. exports as larger southern hemisphere crops and small
exporters filled the new demand.
The coming crop year will probably be affected by the continuing
shrinkage of U.S. and global wheat stocks, below-average Canadian
production, large export supplies among the smaller exporters and
slightly weaker global demand.
Crucial factors to watch are the size of European Union and eastern
European crops, the amount China buys, and the effects of the U.S. farm
bill, Lee said.
The CWB is forecasting slightly higher world wheat production, at 583
million tonnes compared to 2001-02’s 577 million tonnes. That’s well
below 1997-98’s 609 million tonnes, but substantially above levels in
the early 1990s.
World wheat consumption is expected to outstrip production for the
fourth year in a row. That means world wheat stocks will decline as
they have every year since 1998-99. The 141 million tonnes of wheat in
stocks represents the lowest stocks-to-use ration since 1974-75 at 23.8
percent.
But the board also forecasts world wheat trade to fall in 2002-03.
Europe became the world’s leading importer in 2001-02, because of poor
domestic crops. If Europe experiences better weather, that demand will
disappear.
China may import more wheat now that it is part of the World Trade
Organization, which may make up some of the lost demand.
Wheat stocks among the major exporters are expected to remain about the
same.
Denis said the world wheat market now looks at more than just the
stocks of the few traditional exporters.
“The small stocks (among the big exporters) establish a floor, and the
considerable availability from the smaller exporters put a ceiling on
that,” said Denis.
