Canada Markets

The May 10 version of the World Agriculture Supply and Demand Estimates (WASDE) report was not friendly to the wheat market. While the wheat markets have been largely focused on potential damage to the United States hard red winter crop along with planting delays for the spring wheat crop in the northern States and Canadian prairies, a sharp rebound in production elsewhere in the world is more than taking up the slack in production.

U.S. all-wheat production is forecast to fall to 2.057 billion bushels from the current 2012/13 forecast of 2.269 bb, a drop of 9.3%. Global wheat, on the other hand, is expected to see production increase from the 2012/13 production estimate of 665.64 million metric tonnes to 701.1 mmt in 2013/14, a 5.3% increase. Global ending stocks are forecast to rise 3.4% from the current 2012/13 forecast of 180.17 mmt to the 2013/14 forecast of 186.38 mmt.

A measure that I like to focus on is the stocks level in the eight major exporting countries. These eight countries include Argentina, Australia, Canada, the European Union, Kazakhstan, Russia, the Ukraine and the U.S. Still fresh in everyone's mind is the rally in 2012, which was a result of cropping issues in many of the countries listed, all at the same time. The tighter the combined stocks in the countries with exportable supplies, the greater the chance of a positive impact to prices.

From the attached chart, we see that ending stocks in these combined countries (the blue bars) has fallen each of the past three years, from 2010/11 to 2012/13. In the 2009/10 crop year, the combined carryout was 80.37 mmt, which made up 39.7% of the global stocks. Since then, stocks in the eight majors have fallen to an estimated 50.48 mmt in 2012/13, making up 28% of the global stocks.

Recovery in wheat production is forecast to take place in 2013/14, according to WASDE's first look at the new crop year. Today's report included the following changes to ending stocks based on 2013/14 forecasts:

Argentina .72 mmt, down 6.5%

Australia 4.79 mmt, up 13.5%

Canada 6.5 mmt, up 24.8%

EU 14.35 mmt, up 46%

Kazakhstan 3.24 mmt, up 10.6%

Russia 6.42 mmt, up 18.5%

Ukraine 2.82 mmt, up 27%

U.S. 18.25 mmt, down 8.2%

Total 57.09 mmt, up 13.1%

At 30.6% of global stocks, the forecast stocks in these eight exporting nations continue to remain tight in 2013/14 in comparison to past years. Between the 2000/01 crop year and the 2012/13 crop year, these stocks averaged 35.4% of total global stocks. The recent high was reached in 2005/06 when these wheat stocks reached 46% of the total global stocks. The good thing is that it is early days, as production problems in any of the countries discussed could yet play a role in moving the wheat market higher.

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

(AG)

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