The price forecast for wheat and barley sold through the Canadian Wheat Board dimmed last week, but the outlook is not all bad.
On July 24 the board dropped its pool return outlook for wheat by $6-$9 a tonne and feed barley by $5 a tonne from its June outlook.
Durum and malting barley stayed the same.
Forecasts of big harvests in many regions of the world are a weight on wheat and barley prices, the board said.
However, heavy rain and flooding in Europe, lower protein counts in the U.S. winter wheat crop and drought fears in Australia could improve prices, especially for higher quality grain, said Peter Watts, CWB market analyst for western Europe.
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“If we can pull off a good wheat crop here in Canada with good protein, we might be in luck. And the fact that it’s been dry could produce good protein. It might be a blessing in disguise.”
It has been anything but dry in Europe.
“There have been fairly extensive rains for about that last month … and portions of France, the U.K, Germany definitely suffered some damage to the crops,” he said. “The question is, how much?”
More recent flooding in eastern Europe, particularly in Poland, has submerged close to 400,000 acres.
Watts expects this will have an effect on barley and wheat quality.
“We expect there to be less malting barley quality than last year when they had a lot,” he said.
“But we didn’t change the PRO for malting barley because we don’t know what kind of quality we are going to have in Canada. The six-row harvest is a long way off in the United States, too … and the Australians are big two-row malt exporters and with the drought potential there, there could be problems.”
More feed barley
The flip side of less malting quality barley is more feed barley. Europe is already aggressively exporting feed barley with recent subsidies of $16.50 (U.S.) a tonne.
The U.S. is also exporting more.
“The Americans aren’t as concerned about having barley around because they know there will be lots of corn. They sold barley on the latest Saudi Arabian tender, maybe as much as 300,000 tonnes. They are really pumping out the barley,” Watts said.
As for wheat, this PRO was developed three weeks ago when wheat markets were diving. But the lower prices turned up buyers and last week Egypt bought 450,000 tonnes of U.S. wheat. Pakistan has also tendered for 500,000 tonnes of wheat.
Markets are starting to feel the effect of a prolonged dry spell in parts of Australia. Wheat futures on the Sydney commodity exchange rose more than $10 a tonne last week.
“Every day there isn’t rain those futures will climb and that is affecting the U.S. markets. But to be honest, Australia could have a big rain next week and they could have a great crop.”
For that reason, the PRO assumes a normal crop in Australia.
The PRO does not reflect protein premiums, but flooding in Europe and other factors indicate there will be less high protein wheat in the world this year.
U.S. winter wheat last year was rated at 12.5 percent protein, but is down to a more normal 11 to 11.5 percent this year, Watts said.
