As the last dregs of 2002’s short crop are sold at relatively high prices, the Canadian Wheat Board is looking at the world’s coming crops and sees few reasons to forecast prices anywhere near as high for the next year.
In its latest Pool Return Outlook for 2003-04, the board is predicting prices will stay where it had expected, which is more than $50 per tonne lower the 2002-03 PRO.
Wheat board market analyst David Boyes said the widescale production problems that created the surge in prices last autumn have not recurred.
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Since most of the traditional wheat exporters have relatively good growing conditions, even increasing worries about dryness in the American and Canadian west will not easily push prices sharply higher.
“Usually you need problems to happen in a bunch of places before it really affects the price,” said Boyes.
“A little bit of dryness isn’t going to affect the structure of the international wheat price that much.”
A big American winter wheat crop has just been harvested and spring wheat conditions are still OK in North America. Conditions for the young Australian and Argentine wheat crops are also relatively normal, Boyes said.
Alberta Agriculture market analyst Charlie Pearson said wheat markets now are assuming that most traditional exporters will produce big crops, so there is still time for problems to occur that could move the market.
“Everything has looked pessimistic so far, but there are some crop problems in Europe … and we’ve also had some problems in the former Soviet Union … and those are optimistic (price) factors,” said Pearson.
Fortunately for major exporters like Canada, surprise players like Russia and Ukraine are not expected to be able to export much wheat this year.
Those countries’ ability to supply wheat was a major factor that hurt wheat prices in the past year.
“Buyers had all these alternatives,” said Pearson.
“They were able to fill the vacuum.”
This year, most buyers will have to rely on the big five traditional exporters: Canada, the United States, the European Union, Australia and Argentina. In recent years, wheat stocks have been drawn down by steadily increasing consumption, and at some point buyers may get worried and start bidding up prices.
That didn’t happen last year, but it doesn’t mean it can’t happen this year.
“We’ll see if we have the disciplined buying you saw in the past year, or if there’s some panic,” said Pearson.
The wheat board July PRO for the 2002-03 crop year shows wheat falling slightly to the initial payment level (below which it cannot fall because of the federal guarantee), but durum prices rising by $4-$6 per tonne for most qualities.
With only a few weeks remaining in the 2002-03 marketing year, there is not much chance for a large price rally, but Boyes said weather problems could still cause prices to move.
