Wheat prices will stay high for the 2007-08 crop, the Canadian Wheat Board believes.
And durum prices will jump by about 40 cents per bushel, the board said in its first Pool Return Outlook for the new crop year. New crop malting barley prices are forecast to be 67 to 77 cents per bu. better than 2006-07.
The board estimates that No. 1 Canada Western Red Spring wheat with 13.5 percent protein will fetch $220 per tonne, or $6.21 per bushel (in-store Vancouver).
That compares to the 2006-07 PRO of $216 per tonne or $5.88 per bu.
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CWB analyst Jason Newton said wheat market supply and demand fundamentals are not strong, but the crop is supported by its feed grain value.
“Corn is king and it will be the factor to watch,” Newton said at the CWB’s Grain World conference in Winnipeg Feb. 26.
Newton said farmers in most countries, with the exception of Canada and the United States, have seeded or plan to seed more acres of wheat. If yields this year are better than last year around the globe, then wheat production will climb, stocks will build and the crop’s price outlook will become more bearish.
But while corn prices are strong, there is a strong floor under wheat. That is because wheat can be used as a substitute feed.
“Wheat is now (priced as a) feed grain in the U.S.,” said Newton in an interview.
“It’s pricing into rations for cattle feeders in Texas and Kansas, and it’s also pricing in as advantageous for elastic wheat buyers such as South Korea … and as a result wheat is really governed by corn in terms of how far it can fall.”
But he said with supply of wheat and corn so tight, price rallies are possible.
“Given that (stocks) are tight, which is different than they were a year ago, any type of supply shock will definitely lead to a price rally,” said Newton. “There’s a lot of volatility in the market.”
Analyst Brenda Tjaden Lepp of FarmLink Marketing Solutions said the milling wheat PRO seemed reasonable to her. The board tends to be cautious with its PRO projections this early and there are reasons for the board to be cautious this year.
“I was expecting it to be lower, considering what part of the year we’re in, and with acreage all over the world increasing,” said Tjaden Lepp.
“There’s a bearish tone to the wheat market right now.”
John Duvenaud of Wild Oats Publishing said most farmers won’t think the new PRO is a big deal.
“Durum is worth a premium over hard wheat, but otherwise it’s business as usual,” he said. “No surprises. Durum is up. Wheat is unchanged.”
But Saskatchewan farmer and wheat board director Ian McCreary was surprised that the board was forecasting durum acres to fall this year, given the price premium it is expected to enjoy.
“You’d anticipate more acres moving into durum, not fewer,” he said.
The board said that durum prices are being supported by a drawdown in North American stocks. Also, parts of a key durum production and consumption region, North Africa, have been dry, particularly Morocco. If the dryness continues through April, demand from that region will likely increase.
