The Canadian Wheat Board keeps dropping its expected prices for the 2003-04 wheat crop, but it still says there are legitimate hopes for higher prices.
“The supply and demand situation is fairly tight, so if there are any problems then there is much more potential this year for an upswing in prices than maybe in some other years,” said wheat board market analyst David Boyes.
The board knocked down its 2003-04 prices in its June 26 Pool Return Outlook, reducing most wheat grades by up to $8 per tonne, top durum grades by up to $12 per tonne and malting barley by an average of $7 per tonne. Feed wheat prices were not lowered.
Read Also
VIDEO: Catch up with the Western Producer Markets Desk
The Western Producer Markets Desk provides daily updates on agricultural markets, with recent video commentary including looks into canola, wheat, cattle and feed grains.
Boyes said world prices have not dropped in the past month for 2003-04 wheat, but the continuing climb of the Canadian dollar has been slashing away at returns.
“The Canadian dollar’s strengthening is the biggest factor on this particular month’s PRO,” said Boyes.
In the world market a number of factors mean any production problems among the major exporters in the next few months could lead to a price rally, Boyes said.
The United States Department of Agriculture’s estimate of world wheat production of 561 million tonnes is the lowest since 1995-96.
But since then, world wheat consumption has increased.
World wheat stocks have been dropping for years, so if any of the major exporters have serious weather problems this summer, markets could leap, Boyes said.
“When you get down to tighter levels, it doesn’t take as big a degree change in the supply situation to affect the prices,” said Boyes.
The USDA’s June 28 acreage report buoyed wheat prices by suggesting American spring wheat acreage had fallen by 12 percent from last year.
That acreage reduction was larger than the USDA had earlier estimated.
Unfortunately for prairie spring wheat growers, the acreage cuts buoyant effect on prices was weighed down by a huge winter wheat crop now being harvested.
“I don’t think the rally will get too far because of the size of the winter crop,” said Benson Quinn GMS market analyst Ken Ball.
“If that winter wheat crop wasn’t so darned big, I think that prairie spring number would have really inflamed the market.”
The preconditions for a market rally in wheat prices now exist, many analysts say, but few are betting one will occur.
Alberta Agriculture market analyst Charlie Pearson said demand for wheat in recent years has been building more slowly than it has for vegetable oil crops, so wheat markets may not be quite as responsive on the first hint of weather problems.
“A lot of the traditional signals that you would use to indicate tightness show exactly that this year,” said Pearson.
“But that hasn’t really kicked in yet. Will it? We’ll see.”
