Canada Markets

While Friday's USDA was suggested to be bullish for wheat, corn and soybeans, the report's impact on wheat is far less than that seen on the other grains. Bullish news was seen in the following data:

-- Global ending stocks were reduced by 0.31 million metric tonnes, from 176.95 mmt in December to 176.64 mmt in the latest January report. This compares to the 2011/12 ending stocks level at 195.78 mmt and is also slightly behind the five-year average at 177.074 mmt.

-- The Dec. 1 Quarterly Stocks Report indicated wheat stocks to be 1.659 billion bushels, as compared to the average trade estimate at 1.674 bb and 2011/12 stocks at 1.663 bb. Feed usage increased 35 million bushels from 315 mb to 350 mb.

-- Ending stocks were adjusted 38 mb lower to 716 mb from 754 mb.

-- Winter wheat acres came in lower than expected, at 41.8 million acres, lower than the average industry estimate at 42.6 million acres, although still above last year's 41.3 million acres.

The attached chart indicates the most recent USDA estimates of 2012/13 wheat carry-out among the eight major global wheat exporters as compared to the global wheat carryout, measured against the left-hand y-axis in million metric tonnes. The dark line with markers represents the eight major exporters' ending stocks as a percentage of the global ending stocks.

Of interest is the tightening of stocks within the hands of the major exporters. Note that these eight exporters include Australia, Argentina, Canada, European Union, Kazakhstan, Russia, Ukraine and the United States. Since the most recent high in global ending stocks in 2009/10 when global ending stocks hit 202.5 mmt, these same ending stocks are forecast to fall by a total of 12.77% to 176.64 mmt in 2012/13.

Within the same period of time, stocks held by the eight major exporters have fallen from 80.37 mmt to 53.91 mmt, a decline of 33%. Within that period, carry-out in the hands of the eight major exporters has fallen from roughly 40% of global ending stocks to 30% of global ending stocks and has not been as low since hitting 27.1% in the 2000/2001 crop year.

With already tightened stocks, any impacts to production within these eight countries in the upcoming year should be supportive of price. News Monday of potential losses to Russia's winter wheat crop, suggested to range from 5% to 25% due to temperatures as low as minus-20 degrees Celsius in December will be watched closely by the trade, as will drought impacts to the U.S. hard red winter wheat crop this spring. March/April will be the months that these two respective crops break dormancy and the damage can be assessed.

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

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