PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 08:31 UK, 25th May 2017, by Mike Verdin
Canada prioritises quality wheat - and to see canola price buoyancy

Canada's larger-than-expected spring wheat sowings are being undertaken overwhelmingly with a top-quality variety, officials said - in a briefing which cautioned too of upward pressure on canola ahead.

AAFC, Canada's farm ministry - reacting to surprise data last month which showed that farmers intended to raise spring wheat sowings by 8%, far more than investors had been expected - said that the increase was being driven by seedings of "premium quality" Canada western hard red spring wheat.

This "accounts for nearly all the increase for spring wheat", the ministry said, with lower grades such as western special purpose seeing only "small" area growth.

Canada western hard red spring wheat "is expected to account for 80% of the total Canadian wheat seeded up from 76% for 2016-17", AAFC said.

'Limited supply'

The dynamic is being fuelled by the premium attributed to higher quality wheat, which is in relatively short supply despite the record global stocks of the grain overall.

The premium of hard spring wheat, as traded in Minneapolis, over lower-protein Chicago-traded soft red winter wheat on Wednesday touched a contract high of $1.20 a bushel, September basis.

In Canada, AAFC noted that average prices of Canada western hard red spring looked set to hold steady year on year IN 2016-17 "because of the limited supply of high grade, high protein wheat and strong demand for that quality of wheat in world markets".

However, prices for lower protein and lower grade wheat were showing a decline "because of higher US and world supply".

Canola price upgrade

In canola, the ministry nudged higher to Can$510-540 a tonne, from Can$505-535 a tonne, its forecast for average prices this season, as measured in Vancouver, opening up a gap from the Can$509 a tonne achieved in 2015-16.

Indeed, AAFC flagged the upward pressure on values from unexpectedly strong export demand, running 10% stronger year on year, which prompted it to lift by 500,000 tonnes to 10.5m tonnes it forecast for Canada's shipments of the rapeseed variant over 2016-17.

The revision prompted a knock-on downgrade of 500,000 tonnes to a multi-year low of 600,000 tonnes in the estimate for Canada's canola stocks at the close of the season.

'Prices to strengthen'

"The balance sheet for canola is tightening as the rapid pace of usage pressures supplies," AAFC said, adding that the "sharp tightening" in stocks would be evident in a "sharp drop" in deliveries of the oilseed from farms, and upward pressure on prices.

"Farmgate bid prices for canola are expected to strengthen relative to competing oilseeds as buyers compete for tight farm stocks.

"Commercial canola prices are also expected to rise in order to ration demand."

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