The bigger global agricultural picture worldwide now hangs heavy on world wheat values and PROs, at a time when wheat market fundamentals are supportive for the crop, according to CWB.
Among major exporters, in the last half of the marketing year, the main exportable surpluses of wheat are seen only in the U.S., Canada, Australia and the European Union, the former Canadian Wheat Board said Friday, on its release of downward-facing pool return outlooks (PROs) for wheat, durum and canola.
"However, the broader agricultural complex is being weighed down by improvements in South American weather, the slow pace of U.S. corn exports, and perception that world production will rebound in 2013-14."
Most of the decline in wheat futures markets took place in a short period of time through the holidays and "with no fundamental drivers of note," CWB said, which in turn suggests the decline in futures prices is "overdone."
CWB's Early Delivery and Harvest pools for wheat are about 65 and 35 per cent priced, respectively, while pricing activity in the Winter pool is in its "very early" stages.
Durum prices, meanwhile, have moved lower in reaction to weaker milling wheat markets, CWB said, noting durum export sales activity has also been "relatively quiet" over the past month. The Early Delivery and Harvest pools for durum are now about 80 and 35 per cent sold, with no pricing activity in the Winter pool.
Canola futures prices have advanced on soybean futures creating the largest spread between the two commodities in the 2012-13 marketing year, CWB said. Canadian canola ending stocks are projected to be very tight as both domestic crush and export demand continue to pressure the overall canola supply.
"The current usage pace requires a significant scale down, which suggests that prices will remain strong," CWB said Friday, noting less than 20 per cent of the CWB canola pool has been priced. Friday's canola PROs, however, showed No. 1 Canada canola in the Harvest pool at $625 per tonne, down from $640 on Nov. 30, and in the new Winter pool at $615 per tonne -- down from $625 when the pool was launched Dec. 6.
In CWB's Early Delivery pool, wheat PRO values on Friday were down $17 per tonne from the previous PRO on Nov. 30, with high-protein (14 per cent) No. 1 Canada Western red spring (CWRS) down to $343 per tonne and No. 2 CW red winter down to $312. Durum values on Friday in the same pool were pegged $10 per tonne lower, with No. 1 CW amber durum (12.5 per cent) now sitting at $340. Select CW two-row malting barley remained flat from Nov. 30 at $347 per tonne.
CWB's Harvest pool on Friday showed wheat PRO values down $20 per tonne from Nov. 30, with No. 1 CWRS (14 per cent) now at $348 and No. 2 CWRW at $317. Durum values in the same pool were down $15 per tonne, with No. 1 CWAD (12.5) at $340. Select CW two-row malting barley was stuck at its Nov. 30 PRO value of $350 per tonne.
Wheat PRO values in CWB's new Winter pool on Friday were down $23 per tonne from the pool's inaugural PRO on Dec. 6; No. 1 CWRS (14.0) dropped to $341 and No. 2 CWRW to $310. Durum values in the Winter pool were down $10 per tonne, with No. 1 CWAD (12.5) now at $344.
Futures Choice PRO
A first-ever PRO was released Friday for milling-grade CWRS in the Futures Choice Winter pool, CWB's other new pool offering, which was also announced on Dec. 6 with sign-up scheduled to begin Monday (Jan. 7) on a first-come, first-served basis.
In the Futures Choice Winter pool, CWB will pool the basis portion of the price, while farmers lock in their own individual futures prices, in a new format which CWB said "combines the advantages of pooling with the autonomy of cash pricing."
In No. 1 CWRS (14.0), for example, CWB's March, May and July 2013 values are pegged at $18, $14 and $10 respectively. In No. 2 CWRS, those same values are pegged at $2, minus $2 and minus $6.
The sign-up deadline for the Futures Choice Winter pool will be Feb. 15 or until the pool is fully subscribed. Futures lock-in deadlines for the new pool are Feb. 22, April 26 and June 21 for the March, May and July 2013 futures months respectively.