The global wheat market is improving as the Russian export program slows down.
Marlene Boersch, managing partner with Mercantile Consulting Venture, believes old crop wheat prices could climb 25 to 35 cents a bushel as more international business shifts to North America.
“General estimates are that Russia will not do more than 1.5 million tonnes in January compared to close to 5 million tonnes a month at the peak. I think that over the next six weeks or so we might see a bit of an increase in price,” Boersch says.
Indonesia is the number one market for Canadian wheat, followed by China, Japan, Bangladesh and Nigeria.
Japan is an important market because it primarily purchases higher quality wheat. Boersch anticipates the new CPTPP trade agreement will boost Japanese purchases in the coming years.
“That will give us an advantage over the United States as tariffs gradually decrease,” Boersch says. “That should help us increase the (export) number a little bit.”
She is projecting a six percent increase in 2019 spring wheat acres in Western Canada.
The news is less promising for durum with Boersch projecting a ten percent decline in seeded area. Durum is dealing with sluggish markets and a troublesome carryover.
“I think the AAFC (Agriculture and Agri-Food Canada) export estimates are a bit high. We are on track to do almost half a million tonnes less than estimate. That would increase carryout and put us at a fairly negative starting point for next year.”
The biggest concern continues to be declining shipments to Italy. The problem is negative consumer perceptions about glyphosate residue, which has impacted sales. Boersch says it is difficult to quantify the amount because some Canadian durum shipped to the United States will end up in Italy.
Cereals Canada and SaskWheat met with Italian millers and pasta makers last month. Boersch anticipates it will be a slow process with a gradual solution.
In addition, Algeria had a very good crop, which will take away from the overall import demand as well.
“The combination of these things caused the premium that we are used to seeing in durum over spring wheat to evaporate”
Boersch writes a weekly report that is available every Monday on the SaskWheat website. It includes major trades, current wheat prices, upcoming market trends and even some recommendations, if there is a good selling point.
This is the direct link to the January 21st report.
http://www.saskwheat.ca/wp-content/uploads/2016/09/Wheat-Market-Outlook-and-Price-Report_Jan.-21-19.pdf
