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Canada’s prospects for late season wheat sales increased last week when the European Union announced it is suspending weekly wheat tenders for the rest of its crop year.
“It doesn’t mean they can’t export, but it means they are not going to be a very big player in the market for the next two months and probably into July,” said Peter Watts, European market analyst with the Canadian Wheat Board.
“It’s positive for Canada because people will have to come to us for wheat.”
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He said the news helped push U.S. wheat futures higher during the week. “And world wheat markets will follow them up,” he said, adding other developments, such as continuing concern about frost damage to the U.S. winter wheat crop, have also supported prices.
Argentina has sold most of its wheat and will focus on the Brazilian market for the rest of the crop year, Watts said. Australia is about 75 percent sold and should be less aggressive in getting new business.
The U.S. has grain, but so far has a modest export program for the early summer.
“The situation is a little different from last year in that there are supplies, but I think it is a fairly bullish scenario right now,” Watts said.
The EU ended most of its 1996-97 wheat export sales April 17 by closing its weekly tender system. But it left the door ajar to exporters seeking last-minute supplies.
The halt to weekly tenders cemented ideas that European officials are worried about potential damage from dry weather in France.
“It exacerbates an already tight supply situation worldwide. Basically, it is just us and Canada as the sole remaining sellers in the world until October,” said U.S. analyst Charlie Sernatinger at Man International.
Joe Victor, vice-president of marketing for Allendale Inc., said the EU action intensifies concerns about supplies, particularly after agronomists said the winter wheat crop was severely damaged by two days of freezing temperatures April 12-13.
Prices will rise
“As long as we have uncertainty in that wheat (damage) estimate, the only thing we can do is grind it higher,” Victor said, referring to higher prices.
He said the EU’s action was preceded on April 14 by a reduction in its duties on wheat imports later in 1997, a clear sign it was concerned about dry weather cutting the current crop.
“They have to make sure they have enough domestic supplies to feed their own countries,” Victor said.
Watts said the impact on prices is hard to predict.
“When you have a price rally, farmers look at it and make decisions about what to plant,” he said.
“I think it means you are going to see probably that current estimates about lower wheat production for Canada, Australia and Argentina might not be so low. More acres might get moved back into wheat and in the long run that means more wheat supply next year.”
