Even seasoned market watchers like Charlie Pearson were shaken by the Canadian Wheat Board’s bearish forecast for next year’s crop prices.
“Everything is lower than I expected. It’s a hefty decline from last year,” said Pearson, a market analyst with Alberta Agriculture.”It’s very early on in the year, so perhaps it’s a pretty conservative forecast.”
The Feb. 24 pool return outlook for the 2003-04 crop year predicts most wheat, durum and barley prices will plunge.
No. 1 Canada Western Red Spring with 13.5 percent protein is expected to fall to $216 per tonne, or $5.88 per bushel (before deductions), from the current 2002-03 PRO of $274 per tonne, or $7.46 per bu. before deductions.
Read Also
Russian pulse trouble reports denied
Russia’s pulse crop will be larger than last year, which won’t help prices rally from their doldrums.
No. 1 Canada Western Amber Durum with 13 percent protein is expected to fall to $235 per tonne compared to a PRO of $287 for 2002-2003, a drop of $1.41 per bu.
Feed barley and malting barley are expected to see similar declines.
CWB market analyst Dwayne Lee said normal growing conditions in the five biggest traditional exporters would end wheat’s impressive price performance this year. More wheat will be chasing the same buyers.
“Things are shaping up to be very competitive next year,” said Lee.
This year’s price rally was caused by four of the world’s five biggest wheat exporters suffering significant production problems. That not only helped prices, but also left low stocks for 2003-04.
Weather problems in any exporting country could change the outlook even if the rest have average crops.
“If the U.S. ends up with another 44 (million) tonne wheat crop, that would change the outlook drastically,” said Lee.
In recent years the American crop has averaged about 60 million tonnes. This year’s 44 million tonne crop will leave almost nothing in the bin, a potential trigger for a rally.
“With their carry-in, the market will be very sensitive to production problems,” said Lee.
But some potential bad news for Canada isn’t included in the forecast. The CWB has not factored in losses due to any American decision to impose tariffs on wheat imports. That could happen this spring and continue into the 2003-04 crop year.
“It would be millions, tens of millions of dollars (in losses to farmers,)” Lee said.
Pearson said farmers should not despair at this price forecast, the first for the 2003-04 crop year, because there are chances for the market to rally.
The USDA estimates the five traditional wheat exorters will have only 19.2 million tonnes in stocks at the beginning of the new crop year, down 10 million tonnes in just two years.
“We’re on the razor’s edge,” said Pearson.
