Winnipeg – CWB today updated Pool Return Outlooks (PROs) for 2012-13. Values are weaker for wheat, durum and canola pools compared to late 2012, but unchanged for malting barley.
CWB today also released the first basis PROs for the Futures Choice Winter Pool. For this pool, CWB pools the basis portion of the price, and farmers lock in their own individual futures prices. Sign-up for the the Futures Choice Winter Pool begins on January 7. For more information www.cwb.ca/fcp .
Wheat prices have declined considerably over the past month as a result of weaker futures markets. Overall, global wheat fundamentals for the balance of the 2012-13 marketing year remain supportive. In terms of the major exporters, in the last half of the marketing year, the main exportable surpluses exist only in the U.S., Canada, Australia, and the EU – 27. However, the broader agricultural complex is being weighed down by improvements in South American weather, the slow pace of U.S. corn exports, and perception that world production will rebound in 2013-14.
Wheat PROs reflect pool futures pricing activity to date along with forward price expectations. Current Minneapolis and Kansas wheat futures prices for the March - July 2013 period are in the range of $8.50 US to $8.70 US per bushel and $8.10 US to $8.30 US per bushel, respectively, which is roughly $1.00 US per bushel lower compared to a month ago. Most of the decline in futures markets occurred in a short period of time through the holidays and with no fundamental drivers of note, suggesting the decline in futures prices is overdone. The CWB's forward futures price expectations reflect Minneapolis and Kansas City wheat futures in the range of $8.80 US to $9.00 US per bushel and $8.50 US to $8.70 US per bushel, respectively. The Early Delivery and Harvest pools are approximately 65-per-cent and 35-per-cent priced, respectively, while pricing activity in the Winter pool is in its very early stages.
Given current PRO assumptions, farmers in the Futures Choice Winter Pool can expect to achieve a final return for 1 CWRS 13.5 instore port position made up of the futures value they lock in plus $8 to $16 per tonne, depending on what futures month(s) they are pricing futures in.
The durum market has been softer over the past month for a few reasons. While there has not been much change in overall durum supply and demand fundamentals for the marketing year as a whole, durum prices have moved lower in reaction to weaker milling wheat markets. Export sales activity has also been relatively quiet over the past month. The Early Delivery and Harvest pools are now approximately 80-per-cent and 35-per-cent sold, respectively; there has been no pricing activity in the Winter pool.
Canola futures prices have advanced on soybean futures creating the largest spread between the two commodities in the 2012-13 marketing year. Canadian canola ending stocks are projected to be very tight as both domestic crush and export demand continue to pressure the overall canola supply. The current usage pace requires a significant scale down which suggests that prices will remain strong.
The canola PRO reflects canola futures values in the range of $580 to $620 per tonne, and less than 20 per cent of the canola pool has been priced.
General pool assumptions:
- Canadian dollar at par versus the U.S. dollar
- Early Delivery Pools reflect market activity in the first half of the crop year, with sales to be executed by the end of February 2013 (farmer deliveries by the end of January)
- Harvest Pools reflect activity through the entire crop year, with sales to be executed by the end of August 2013 (farmer deliveries by the end of July)
- Winter Pools reflect activity through the second half of the crop year, with sales to be executed by the end of August 2013 (farmer deliveries by the end of July)