Problems in the world economy pushed price forecasts for some types of wheat and barley lower last week.
The latest monthly pool return outlook from the Canadian Wheat Board for the 1998-99 crop lowered forecasts for mid- to lower-quality wheats by $1 to $6 per tonne.
Overall, world production of wheat is lower this year. But most exporting countries have good crops.
The European Union, now in the midst of harvest, will have a record crop. Farmers there produce mid- to lower-quality wheats, said board analyst Derek Sliworsky.
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The white wheat crop in Australia is off to a good start. Harvest starts there in November.
“The demand will be there, but it’s all dependent on how aggressive the competitors will be pricing into the markets,” said Sliworsky.
Importers have been buying hand-to-mouth rather than forward-pricing their needs because of bouncing currencies around the world, he said.
“A lot of the people making the buying decisions in the importing countries aren’t too sure of what their buying power is going to be … for the long term.”
The dropping price of corn has also pulled down wheat prices, said Sliworsky.
“The market has continued to slide and if we do not see a turnaround, our price projections will move lower.”
However, he noted the ever-dropping Canadian dollar has helped offset the steady price declines. For example, when the exchange rate was $1.57, a tonne of wheat sold for $100 U.S. would be worth an extra $57 for Canadian farmers. Canadian farmers are earning $8 more for every $100 (U.S.) per tonne because of the drop in Canadian dollar value.
But if the Canadian dollar starts rising, the PRO could fall some more.
“If the dollar strengthens from this point, we would have to factor a strengthening into our estimates,” he said.
Price forecasts could improve if China buys more wheat. Sliworsky said floods in that country have hurt stocks and production.
Price forecasts for higher quality wheats could also improve if Australia’s wheat crop gets too much rain before harvest, pushing more of its expected production into lower grades, said Sliworsky.
But those are the only threads of hope the market is grasping for, he said.
“I don’t want to say that we expect prices to get a lot better, because there’s really a lot of uncertainty right now.”
Forecasts for higher quality red spring wheats grading No. 1 and 2 and extra strong wheat were not changed from last month. The wheat board has sold higher quality wheats into the relatively strong markets of the United States, Europe and the United Kingdom.
The board lowered the outlook for two-row malting barley by $5 a tonne from last month partly because of good crops in Europe and Australia. World prices have dropped because of economic uncertainty, particularly in China, one of the largest buyers of the barley, said Sliworsky.
An excellent barley harvest in the U.S. lowered the price outlook for six-row malting barley by $7 per tonne.
Price forecasts for durum were unchanged.
But the wheat board forecast for feed barley rose by $5 per tonne because of relatively strong world demand and tight supplies.
