The Pool Return Outlook for
2002-03 wheat has fallen to a level only a dollar or two per tonne above the government guaranteed initial price.
After peaking in October, the PRO has been falling steadily, first because of competing supplies from Black Sea sources and recently because of the stronger Canadian dollar and expectations of larger harvests this fall.
The PRO for No. 1 CW red spring wheat 11.5 percent protein is now $243 per tonne, a drop of $7 since the last 2002-03 PRO in March. The guaranteed initial price is $241 per tonne, only $2 off the PRO. The margin between the PRO and initial prices is more comfortable in durum and barley.
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If the final wheat price ends up below the initial, Ottawa is required to top up the payment to match the guarantee.
That last happened in 1990-91.
Such a payment would be a problem in a year when the United States is investigating the wheat board for alleged dumping.
But a spokesperson for wheat board minister Ralph Goodale said there is no point in speculating about the final payment.
“We really don’t want to speculate about where prices will or won’t go at this point,” said John Embury, Goodale’s director of communications.
While the PRO is the best expectation of where final prices will end up, recent volatility in wheat and currency markets has made the forecast difficult, said David Simonot, the wheat board’s marketing manager for sales policy and planning.
“Over the last couple of weeks we have been seeing extreme volatility both in foreign exchange and in wheat markets, and so these numbers are still jumping around quite a bit, which is unusual for this time of year.”
In May, U.S. wheat futures soared on concern about tight world stocks and seeding delays in the U.S. and Canada.
But the American dollar was falling against other currencies. In Canada, the loonie peaked at slightly more than 74 cents US May 20, up 14 percent since the start of the year.
For Canadian farmers, the exchange difference wiped out the gains in the futures prices.
But at the end of last week, the loonie fell.
“It has been moving favourably for us the last couple of days,” Simonot said.
Last week the wheat market’s rally stalled as seeding weather improved.
Simonot said the majority of the 2002-03 wheat crop is already sold, muting the effect of currency and price changes, but some grain is still to be moved and the risk on the PRO will continue.
