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Bumper harvests to send Ceres Global Ag grain volumes soaring

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North America's strong wheat, pulse and canola harvests, besides the launch of a Can$100m terminal, will allow Ceres Global Ag - attempting to draw a line under durum losses - to near-double the volumes of grain it carries.

The Toronto-listed group, which is headquartered in Minnesota in the US, said it would handle 100m-11m bushels of grains in its 2017 financial year, which ends next June.

That would be nearly double the 55.8m bushels of grains handled last year, an increase reflecting in part the "successful buildout" of its Can$100m Northgate commodities hub in Saskatchewan, Canada, which the group is continuing to develop, having in April finished output of a high-speed elevator.

Ceres Global Ag also noted the potential for "increased utilisation of other elevators" in its network, which as of the end of June had storage capacity for 43m bushels, spread across Saskatchewan and Ontario in Canada and Minnesota and New York in the US.

Indeed, 5.4m bushels of that capacity was idled as of the end of June.

'Record crops'

The group said that its forecast for a jump in volumes was "also due to the record crops produced during the recently completed harvest season", with Canada and the US enjoying bumper yields of many crops.

The US wheat crop, estimated at 63.2m tonnes by the US Department of Agriculture, was in fact the highest in nine years, with Canada's crop, pegged by the USDA at 30.5m tonnes, the second highest in 25 years.

Statistics Canada last week estimated the domestic canola harvest at an elevated, if not unprecedented, 18.3m tonnes.

Also last week, G3, the former grain export monopoly for Canada's Prairies, said that domestic yields for most summer-harvested crops were "good to very good", if adding that "harvest weather conditions have not been perfect and have created slight delays" to fieldwork.

Indeed, there has been some talk of quality damage from late rains to Canada's important spring wheat crop, concerns reflected in a rise on Friday to $1 a bushel temporarily in the premium of Minneapolis-traded hard red spring wheat futures over lower-protein, soft red spring wheat, as traded in Chicago.

"The wheat market has uncovered a bid in the Minneapolis market as rains fall on last of Canadian wheat harvest," Minneapolis-based broker Benson Quinn Commodities said.

Wrong bet on durum

Ceres Global last week - unveiling a loss of Can$1.9m for the April-to-June quarter despite a surge in revenues to Can$149.3m, from Can$59.3m a year before – said that the Northgate development would "contribute positive" to earnings in the current financial year, but stopped short of exact forecasts.

The group is recovering from a wrong bet on the durum market, on which it swallowed a net trading loss of Can$10.3m between the end of March 2015 and the end of June this year, after prices of the wheat type, which is used to make pasta, did not find the support that the company had expected.

Ceres Global Ag attributed the weakness in durum prices to that fact that "Canada and US supplies were not as tight as forecasted earlier in the year", while harvests in other countries "produced high yields and increased global supplies".

The company has introduced measures, including a switch away from flat-price trading in durum, in response to the setback.

By Mike Verdin

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