Grain markets got little good news last week from analysts looking toward 2014-15.
“I think we’re in this game (of low prices and clogged logistics) for the next 18 to 24 months,” Parrish and Heimbecker wheat marketer Dean O’Harris told Grainworld Feb. 24.
“You’re going to have to have at least two years in a row in order to make a significant difference in the long-term trend of the markets,” he said.
The overall world wheat stockpile is not onerous, but O’Harris said Canadian supplies are bulging and can’t be moved fast enough to avoid a big increase in carryout. The free ride that U.S. wheat had because of small corn crops is gone.
Read Also
Critical growing season is ahead for soybeans
What the weather turns out to be in the United States is going to have a significant impact on Canadian producers’ prices
It leaves a burdensome wheat ending stocks situation.
O’Harris said the Canadian 2012-13 stocks-to-use ratio was 18 percent, but the 2013-14 ratio will probably soar to 37 percent. It could drop to 30 percent for 2014-15, but “that’s still a pretty significant number.”
Some projections have had the 2013-14 all-wheat carryout climbing to 11.5 million tonnes and then falling to 9.6 million in 2014-15.
However, the 2013-14 carry out could rise to 13.5 million tonnes if the transportation system is truly behind by two million tonnes.
O’Harris said the stocks situation will be terrible again if 2014-15 produces more than a 30 million tonne all-wheat crop.
“My biggest question is what happen if we have a 32 million tonne crop,” he said.
“A 32 million tonne crop with just the numbers sitting here today, with a seven million tonne increase in carryout, feels like a 37 million tonne crop again.… If the carryout is actually going to be 13 million tonnes, it’s going to feel like a 39 million tonne crop.”
John Griffith of grain company CHS offered little hope for sharply higher prices in 2014-15 on durum but said some of the supply overhang will probably dissipate during the year, creating a better future.
It is dry in the key consuming region of western North Africa, so import demand will increase if that is not alleviated completely within the next three months.
Griffith said Canadian farmers are unlikely to produce a record high-yielding crop again this year.
He counselled farmers to have patience while the oversupply is worked down because there’s no quick solution to the situation.
“We are clearly living with a burdensome supply in the world today,” said Griffith.
O’Harris was not bullish about prices, but he wasn’t bearish either, expecting a likely end to the slide that has gone on for a year.
“I think it’s starting to base out,” he said abut durum and milling wheat prices.
He doesn’t expect the recent wheat price rally to continue for long and believes the lows could be slightly exceeded. However, prices are probably at a long-term bottom and will likely trade sideways for the next year or two, he added.
