Ramzy Yelda titled his remarks about world wheat markets as the light at the end of the tunnel.
But in his explanation of the first pool return outlook for the 1999-2000 crop year, the marketing manager for the Canadian Wheat Board made it clear there is little hope for a recovery of wheat and durum prices.
Yelda said he expects wheat to remain at current crop year prices. And he thinks durum will drop $20 per tonne.
“We’re all kind of bearish these days,” said Yelda, speaking to the annual GrainWorld market outlook conference.
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While Canadian farmers will likely cut production of both crops, large stocks held by major exporters will continue to weigh down prices.
The recent slump in canola prices to levels below $300 per tonne has many speculating that Canadian farmers will choose to grow lower-input crops like wheat, which could worsen the outlook, said Yelda.
“I’ll be blunt: All prices stink,” said Yelda, adding farmers are looking for the “least worst alternative” to grow.
Yelda traced low wheat prices back to bumper world crops in 1997-98. While farmers around the globe have decreased production since then, there is still a surplus of wheat, he said.
In 1994-95, world wheat ending stocks were a scant 106 million tonnes. Last year, they were a plentiful 138 million tonnes.
Yelda said the wheat board expects world ending stocks to be close to 127 million tonnes this year, and fall to 110 million tonnes in 1999-2000, which is “very low by historical standards,” he said.
“The other side of the coin that’s more bearish is the U.S. ending stocks situation.”
At 26 million tonnes at the end of this crop year, U.S. stocks will reach their highest levels since 1987-88.
Since the United States is the world’s largest wheat exporter, and traders focus on U.S. futures markets, large U.S. supplies will drag on prices, said Yelda.
And Europe is running out of storage space because it has so much grain, noted Yelda.
The wheat board pushed sales in 1997-98, exporting 20 million tonnes. This year, it expects to export only 14.6 million tonnes, said Yelda.
Of this, less than nine million tonnes will be Canada Western Red Spring wheat, allowing the wheat board some leverage in selling only to customers who will pay a premium for the crop, said Yelda.
For example, Iran had been one of the wheat board’s biggest customers for the past two years. But because Iran won’t pay top price for high grade wheat, and the wheat board has tight supplies, the country is buying wheat elsewhere.
“We have a fairly tight spring wheat availability in both Canada and the U.S.,” said Yelda.
In 1999-2000, he expects the board to export 17.2 million tonnes of wheat.
World wheat trade will increase slightly, and world production will drop slightly. Record consumption will lower stocks, but not enough to spur prices much higher, said Yelda.
