Future wheat prices depend on the pace of exports out of the United States, says a grain industry analyst.
Marlene Boersch, a partner in Mercantile Consulting Venture, said some industry observers believe U.S. exports have been front-loaded and that the hectic early-season pace won’t be sustained throughout the second half of the 2010-11 marketing campaign.
However, Boersch isn’t in that camp.
She expects U.S. exports to remain strong to compensate for weaker-than-expected exports out of the European Union.
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The U.S. Department of Agriculture is forecasting 22 million tonnes of EU wheat exports in 2010-11.
Boersch told delegates attending Agri-Trend’s 2010 Farm Forum Event last week that Mercantile has contacts in Europe who believe shipments will be closer to 16 million tonnes.
“There’s a major difference there,” she said in an interview following her presentation.
International buyers will be forced to fill the six million tonne void with imports mostly from the U.S., which means the sales pace will be maintained going forward, propping up global wheat prices.
“I think that wheat is a market that has a little way to go yet,” she told delegates.
Boersch said there is plenty of anecdotal evidence to support the theory that Europe is short on wheat.
For instance, Germany has been heavily importing bread wheat from France. French exports are up 34 percent year-to-date.
Another clue is the widening gap between wheat futures at the Matif exchange in France, and those in Chicago, suggesting Europe is in “dire straits” when it comes to wheat.
Boersch was also bullish on another widely grown western Canadian cereal crop.
“We think barley is actually going to be very, very tight.”
She told delegates the crop is “well undervalued” in Canada.
“The problem is that we don’t see it clearly here. The (Canadian) Wheat Board hasn’t given aggressive signals last year and even year to date.”
Barley production is down, but demand is unchanged. China needs to import 1.5 million tonnes of malting barley to replace dwindling stocks.
Saudi Arabia requires 2.5 million tonnes of feed barley this winter and seven million tonnes this crop year.
European farmers are seeding less barley this fall in favour of wheat, and there is no hidden supply to make up for the pending shortfall.
“There is no way that barley is not going to be running tight, so prices should be moving up,” said Boersch.
She said farmers should expect a $20 per tonne premium to corn in terms of feed value.
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