The picture keeps getting rosier for wheat prices, and farmers will
probably see more increases, say market analysts.
“We’re still relatively conservative,” said Alberta Agriculture market
analyst Charlie Pearson about the Canadian Wheat Board’s Sept. 12 Pool
Return Outlook.
“We’ll probably see prices move higher into the winter.”
This PRO is the second mid-month adjustment in as many months, a rare
event that only occurs when world grain markets move suddenly and the
board decides it cannot wait a full month between normal PROs to pass
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on the information to farmers.
The Sept. 12 PRO only detailed designated barley prices, which
increased by $13 a tonne across all types. It also stated that milling
wheat returns may also increase by $15-$40 per tonne by the next PRO.
CWB market analyst Peter Watts said this mid-month PRO was necessary to
assure farmers that malting barley prices are finally moving higher, as
milling wheat prices have been doing for months.
“We wanted the malting barley information out to them that malting
barley prices are rising, returns are improving, and the designated
barley pool is an option,” said Watts.
The world malting barley market has lagged the run-up in wheat futures,
Watts said. But with the Australian crop suffering and the Canadian
crop having quality problems piled atop of drought, the market is
finally reacting.
Watts said the board also wanted to publish the better outlook because,
unlike wheat that is publicly exchanged on futures markets, malting
barley is only traded in private, so farmers have few price measures
outside the CWB.
Watts thinks wheat prices could move higher than the current PRO, but
the present valuation is as accurate as possible.
“We’re doing our best to reflect as closely as possible what we think
the returns will be for producers.”
That’s difficult when the world market is so twitchy.
“In the past four or five weeks we’ve seen volatility like we haven’t
seen for five or six years,” said Watts.
The board will easily be able to sell its wheat, said Watts.
“The crop is so small in Western Canada compared to usual that the
wheat board is in the driver’s seat in terms of where we market the
grain, when we market the grain, and what price level we market the
grain,” said Watts.
The only problem will be handling the wide range of quality.
Pearson said the board will probably have firm or better prices for the
next six months, but some of the shine might come off the wheat market
next spring. If a large winter wheat crop is planted in the United
States as many expect, and its condition appears OK in the spring,
prices could come under some pressure.
That means the board’s best sales will probably occur before spring.
“If we have a significant number of sales next spring, that could
potentially bring down pool return outlooks,” said Pearson.
On Sept. 12, the Western Canadian Wheat Growers Association demanded
that the CWB explain why it had apparently stopped selling wheat on the
world market and why it was buying back wheat futures. It suggested
that farmers hold off on signing CWB contracts until the board’s
marketing strategy was clearer.
Other critics have wondered whether the board pre-sold too much of the
2002-2003 crop, missing out on the present world wheat rally.
Wheat board chair Ken Ritter denied these suggestions, describing them
as “gross exaggerations and thoughtless.”
He said CWB directors met with marketing managers on Sept. 13 and were
convinced board salespeople had not sold the 2002-2003 crop before the
recent rise in prices.
“All of the board felt satisfied that the marketing activities were
appropriate for the kind of year we’re having,” said Ritter. “There was
very cautious selling in the summer.”
He would not detail how much of the crop has already been sold, saying
that information is commercially sensitive.
Ritter said the board will look for new business only once the size and
quality spectrum of this year’s crop is clear, which won’t be until
about the first week of October.
