Canada Markets

Negative news for both U.S. domestic wheat markets as well as global markets released in Wednesday's USDA report was not received well by traders. Wheat futures across the three exchanges ended between 6 1/4 cents to 12 cents lower, with nearby contracts for Chicago SRW indicating the largest losses.

While the Dow Jones survey of trade analysts indicated that the U.S. all-wheat ending stocks for 2013/14 would average an increase of 23 million bushels from last month's forecast of 558 mb to 581 mb, the April ending stocks figure was released above the average estimate at 583 mb.

The domestic supply and demand tables were most influenced by a reduction in feed demand which added to the ending stocks for HRW, HRS and white wheat, while U.S. imports are forecast to fall 5.9% to 165 mb. By class, HRW imports increased 2 mb to 17 mb, SRW imports fell 3 mb to 22 mb and U.S. durum imports fell 4 mb to 43 mb, with Canada's logistical challenges affecting movement of durum south. USDA held the line on HRS imports, leaving this volume unchanged at 75 mb, or 2 mmt.

Dow Jones reported the average trade estimate of global ending stocks to be 183.7 million metric tonnes, while USDA responded with a volume which was 3 mmt above the average estimate at 186.7 mmt. This is a 10 mmt increase over the ending stocks estimated for the 2012/13 crop year, as seen on the attached chart, which re-enforces the notion that global inventories remain adequate.

Looking further at global data, consumption has been reduced on paper by 2.4 mmt from the March estimate, while global trade has been reduced by 2 mmt. China is the single largest determinant of this data, with that country's total consumption estimated to fall by 2 mmt to 123.5 mmt, while imports are expected to fall by 1.5 mmt. This in turn creates a ripple effect across some of the exporters, with both Canada and Australia expected to ship 500,000 mt less than estimated in March.

As seen on the attached chart, the estimated global carryout at 186.68 million metric tonnes is the fourth highest carryout since the 2003/04 crop year. The global stocks-to-use ratio, at 26.58% is above the average stocks-to-use ratio of the previous 10 years, which is 25.82%, indicating a comfortable stocks situation and perhaps limited upside price potential.

Chicago SRW closed 10 3/4 to 12 cents lower, Minneapolis HRS ended 6 3/4 to 10 1/2 cents lower while Kansas City HRW closed 6 to 8 3/4 cents lower.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

(AG)

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