When world stocks dwindle, wheat farmers usually reap higher prices.
But for the past year, world wheat markets have defied that trend.
Stocks are among the lowest in two decades, but prices have been lacklustre.
That’s because the world’s five major exporters have been holding most of those stocks, said market analyst Don Bonner, who works for the Canadian Wheat Board.
Production dropping
However, there are signs world prices may be on the rise.
Estimates of world wheat production for 2000 have become smaller in recent weeks.
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The United States Department of Agriculture recently reduced its world wheat production estimates by 3.2 million tonnes to 579.9 million tonnes.
That may seem like a mere crumb of a reduction, but where it happened is significant, said Bonner.
Two major exporters, the U.S. and Australia, will now have smaller crops than markets originally anticipated.
That helped push up the outlook for returns for Canadian wheat growers this month by $10 to $13 per tonne for higher quality wheat.
The pool return outlook for No. 1 red spring wheat with 12.5 percent protein jumped to $192 per tonne at port position, up from $179 per tonne last month.
It’s the first month for a simplified system of reporting the pool return outlook.
Instead of a $30 range of returns, the wheat board now provides one number, representing the mid-point of the range.
“Most people were just using the midpoint anyway,” Bonner said.
The sparks in world wheat prices last month came from a report of a smaller-than-expected U.S. wheat crop.
The USDA lowered its estimates of hard red winter wheat production by 1.1 million tonnes to the 23 million tonne mark.
The department also dropped its estimates of spring wheat production by 700,000 tonnes to 13.8 million tonnes.
“That reduction was a bit of a surprise.”
Weather concerns about next year’s U.S. wheat crop have also added some strength to wheat markets, he said.
In many areas, farmers seeded winter wheat into dry soil. Lack of rain caused delays in seeding and emergence.
“A lot of farmers were just putting the crop into dust.”
Recent rains have alleviated some of the problems. But in some parts of the U.S. wheat belt, farmers were deluged with 10 to 15 centimetres of rain, said wheat board weather analyst Bruce Burnett.
“It’s a very ironic situation in a way. You go from feast to famine.”
Weather plays role
In coming weeks, warm and moist weather would help the U.S. winter wheat crop regain some ground.
But cool weather, on the other hand, may cause concern about the ability of the young crop to survive over winter, said Burnett.
However, the amount of moisture the U.S. wheat belt receives from March to June will be a more critical factor in the fortunes of next year’s crop, Burnett said.
