WINNIPEG – Canadian Wheat Board analysts have been watching the world wheat market from several angles lately – and they all appear to be converging on one optimistic plane.
- Weather surveillance both on the prairies and globally suggests reduced production and a strong demand for good-quality wheat again this year.
Rain makes grain, but hot, dry weather makes protein – and that’s exactly what appears to be happening in the western part of the prairies as the growing season winds down.
The board’s chief commissioner Lorne Hehn told reporters last week the weather conditions may reduce yields, but that should be offset by improved quality in the wheat that’s there.
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Largely due to reduced acreage, the board is expecting to have about 15 million tonnes of hard red spring wheat (down from a five-year average of 22 million tonnes) and 4.8 million tonnes of durum to market this year.
Brazil has had frost. Australia has had drought which will cut its harvest by about five million tonnes. Stocks globally could dip to levels not seen since the 1970s.
- The finance department has been tracking Russia as it pays down the credit overdraft that knocked Canada’s largest and most reliable grain buyer right off the customer list last year.
The $90 million received on outstanding grain accounts over the past five weeks brings this year’s payments from the Russians to $300 million. They still have $50 million to go before they are under the $1.5 billion ceiling.
“There’s a good chance we’ll be selling them some quantities in the coming year,” Hehn said. The Commonwealth of Independent States ( the former USSR) will need about 2.5 million more than it imported last year.
- The board thinks it can keep South Korea, which became Canada’s biggest wheat customer after buying nearly 2.6 million tonnes last year – despite the resurgence of U.S. feed export stocks.
Officials also expect to see China enter the world market earlier, searching for two million tonnes more than it bought last year.
- Transportion logistics promise a smoother flow to export position – barring labor strife or unforeseen weather.
- U.S. export subsidies, which neared $60 per tonne at their peak last year, have started off the new year at about $7 U.S.. Hehn said the market fundamentals don’t justify any subsidized exports, but at least they are low.
