The relatively low quality of Canada's, huge, wheat harvest
could see more of it ending up with buyers such as Egypt, threatening the
dominance of the likes of France and the US in these markets.
The US Department of Agriculture - expanding on high-profile
crop estimate revisions in Tuesday's Wasde crop report – said that an upgrade
to a record 154.3m tonnes in the forecast for wheat trade in 2013-14 reflected
expectations that low prices will spur import demand, especially for lower
Wheat-importing countries are "taking advantage of" the
boost to supplies in exporting countries such as Australia and Canada "to
import and use more competitively priced, lower quality wheat", the USDA said.
Countries expected to buy more included Egypt, the top wheat
importer, which now looked on track to ship in 10m tonnes, 500,000 tonnes
higher than previously thought, and up 1.7m tonnes from last season, when the
country's financial crisis dented its ability to fund purchases.
"This year, the Egyptian economy and import potential is expected
to be supported by sizeable financial assistance pledged by Saudi Arabia,
United Arab Emirates, and Kuwait," the USDA said.
A stronger pace of wheat purchases by Egypt's Gasc grain
authority, which has bought some 3m tonnes at tender so far this season, "gives
an indication that the country is on the way to import wheat quantities that
are closer to its usual level of imports".
However, while the likes of France and the US would be expected
to lift sales to Gasc as 2013-14 progresses, as the typical early season
dominance by Black Sea wanes, Canada may pick-up trade this time as it sells
down a harvest upgraded to a record 37.5m tonnes.
Canada wheat output and (exports)
2013-14: 37.5m tonnes, (23.0m tonnes)
2012-13: 27.21m tonnes, (19.0m tonnes)
2011-12: 25.29m tonnes, (17.4m tonnes)
2010-11: 23.30m tonnes, (16.6m tonnes)
2009-10: 26.95m tonnes, (19.0m tonnes)
"Although logistical problems, especially the railway
system, could hold back export activity, the mammoth crop should find its way
to world markets," the USDA said.
"Given the lower quality of this year's Canadian wheat, it
is possible that it could be competitive in countries such as Egypt that
usually do not import from Canada, given the typically high quality of Canadian
Canada's, predominantly, high protein spring wheat crop usually
exceeds the needs of many importers.
However, the protein level for red spring wheat this year is,
at 12.9% from the main Prairie producing states according to Canadian Grain
Commission data, down 1.0 point year on year, and below average levels of about
Red spring wheat protein levels, Prairie states, and (2012 result)
Manitoba: 13.4%, (14.3%)
Alberta: 12.8%, (13.6%)
Saskatchewan: 12.7%, (14.1%)
All western Canada: 12.9%, (13.9%)
No 1 wheat: 12.8%, (13.6%)
No 2 wheat: 12.8%, (14.1%)
No 3 wheat: 13.3%, (14.4%)
Source: Canadian Grain Commission. 2013 data accurate as of November 26
This is true for Number 1, Number 2 and Number 3 grades, and
particularly for the Saskatchewan crop, for which protein levels came in behind
those in Alberta and Manitoba.
Some erosion has emerged too over the quality of the
Australian crop, which on quantity was also upgraded, to the country's third
biggest on record.
Results from the first 70% of the harvest show that the "quality
profile continues to deliver a low-to-mid protein crop", said Josh Martin, head
of trading and risk management at AWB, the Cargill-owned grain handler.
Nonetheless, Australian wheat prices "have strengthened on
the back of good domestic and export interest", Mr Martin said.
"A small Australian wheat carry over from the 2012-13 season
has also meant pipelines into domestic export channels are being replenished,
resulting in good demand."
A weakening Australian dollar, which dropped on Thursday
below $0.90 to Aus$1.00, is also boosting the appeal of Australian exports.
On the Sydney futures market, Australian wheat for January
closed on Friday at Aus$300.00 a tonne, matching the highest for a spot
contract in more than a year.