G3 Canada Ltd's latest update showed the Winter Pool Return Outlooks for CWRS wheat marketed in the February-through-July 2016 period to be facing a number of factors which are negatively affecting price. Commentary suggests "weaker futures, fading basis, higher-than-expected grade and protein delivered, and narrowing spreads."
As of Sept. 28, the Saskatchewan Crop report indicated that 28% of the wheat was yet to be harvested, while Alberta Agriculture's reported as of Sept. 29 showed 32.5% of the wheat was yet to be harvested, with the trade leaning towards a downgrading of the later crop due to issues such as sprouting and bleaching.
Perhaps one early indication of the grade distribution across the Prairies was seen in the Canadian Grain Commission's Protein content of Wheat, Canada Western Red Spring report, although the report cautions that the samples may not reflect production distributions across grades. Of the 4,711 samples reported from across Western Canada, approximately 35% were graded as No. 1 CWRS, and 33% were graded as No. 2, or 68% in the top two grades.
During the Cereals North America conference in early November, Bruce Burnett of G3 (formerly CWB) estimated that 63% of the western CWRS crop graded in the two top grades, which compares to the 50% achieved last year and the three-year average of 65%.
Deliveries to licensed terminals by grade are suggesting that crop quality could be much higher than expected. As seen on the attached chart, the blue line, red line and green line reflects the cumulative deliveries to licensed terminals for No. 1, No. 2 and No.3 CWRS. As of week 25 or the week ending Jan. 24, a cumulative total of 1.5795 million metric tons of No. 1, 5.3353 mmt of No. 2 and 653,000 mt of No. 3 have been received by licensed terminals. The purple line indicates that since August 1, the cumulative receipts of CWRS in the top two grades represents 91.4% of total CWRS receipts. This percentage has remained in a narrow 2% range over the past 15 weeks of reporting, between 90% and 92%.
Thursday's Statistics Canada Dec. 31 stocks data may provide insight into the disappearance of lower-grade stocks into feed channels.
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