World Wheat Production By Country - 25 Largest Producers

Transcription

1 Wheat Market Outlk and Price Reprt: August 8th, 2017 By Marlene Bersch/ A.P. Temple Mercantile Cnsulting Venture Inc. i) Backgrund and Ratinale fr the Reprt The fllwing wheat market utlk and price reprt will be published n a weekly basis n the Sask Wheat Website. The reprt prvides prducers with an verview f wrld wheat markets, a market frecast, and benchmark prices at bth the primary elevatr and exprt psitins (FOB Vancuver r elsewhere). The reprt is made up f several sectins. Fllwing this sectin, a Wrld Wheat verview is prvided, which includes a summary f wheat market fundamentals, wrld prductin and trade, and a wheat market utlk. This is fllwed by several price tables, which include primary elevatr bids at varius Saskatchewan lcatins (Table 1), grain spreads (Table 2), and FOB prt prices and basis (as measured by subtracting the primary elevatr price (Rsetwn) frm the relevant prt lcatin price fr individual crps) (Table 3). Table 3 is preceded by a descriptin f the varius assumptins, definitins and methdlgy used in arriving at the FOB prt prices and in the exprt basis calculatin. ii) Wheat Market Outlk August 8/ / 18 Wrld Wheat Overview: 160, , , ,000 80,000 60,000 40,000 20,000 0 Wrld Wheat Prductin By Cuntry - 25 Largest Prducers 2016/ /2018 Tp 25 wheat prducing cuntries: While US wheat prductin has been affected by drught, the US is f lesser cncern t wrld prductin vs the EU, China, India, and Russia. Wrld wheat supply is expected t remain stable in the cming USDA WASDE reprt, with Russia prjected t set secnd cnsecutive wheat prductin recrd accrding t all reprts. The USDA is expected t slightly reduce prjectins fr glbal wheat prductin in upcming WASDE reprt n August 10 th, but glbal ending stcks are expected t remain relatively unchanged with nly minr adjustments. 1

2 Funds: Index Funds did sme prfit taking in the past week, but we dn t see them reducing the size f their lng. Specs and Spec funds were big sellers f crn and wheat last week based n increased estimates f Eastern Eurpean prductin. Matif: Matif exchange in Eurpe clsed at which was dwn by 0.25 n Fridays trade, but dwn by 7.00 r 4.11% fr the week. Canadian wheat: Accrding t the CGC, prducers delivered 315k mt f wheat int the handling system, which is dwn frm last week s 388k mt. Exprts fr week 52 were 247k mt, up frm last week s 200k mt, and dwn 11% (-1.8 millin mt) frm last year s YTD exprts. Elevatr stcks are currently at 2.99 millin mt with 1.6 millin mt at primary elevatrs and mst f the remaining inventry at prt. The bulk f wheat inventry at prt is lcated n the east cast with 130k mt at Thunder Bay, 596k mt at the St Lawrence, and 192k mt at Bay and Lakes. Meanwhile, the Pacific cast has nly 307k mt at prt, which is cmparatively small. Prducers delivered 131k mt f durum int the handling system ver the past week. Durum exprts during week 52 amunted t 27k mt; 4.29 millin mt year-t-date. This is very clse t last years year t date exprts f 4.36 millin mt. Manitba s harvest f winter wheat and fall rye has nw begun in central regins f the prvince. Mst f the prvince is reprting belw nrmal precipitatin and wuld benefit frm additinal rains. Mst crp are ff flwer and are currently in the pdding and filling stages f develpment. The weekly Saskatchewan crp prgress reprt indicates that harvest has nw begun in sme suthern regins f the prvince with reprts frm these regins indicating average t belw average yields. Mst f the prvince had little r n rain ver the weekly reprting perid with many suthern regins cntinuing t be in drught. Tpsil misture acrss the prvince is nw reprted t be 29% adequate, 41% shrt, and 29% very shrt. Crps acrss the prvince are turning quickly due t warm cnditins and dry weather. The August 1st Alberta crp reprt indicates crp cnditins have declined an additinal 3% acrss Alberta. 57% f Alberta crps are nw reprted t be gd r excellent, which is dwn frm 60% gd/excellent last week. Ht dry cnditins cntinued in the suthern and central regins f the prvince where crp cnditin ratings declined by 6% and 14% respectively. While rain is needed in bth the suthern and central regins, it is cnsidered t be t late fr crps in the suthern regin. Glbal wheat prductin and trade: There is a lt f cmpetitin in the wheat markets as wheat is prduced arund the wrld. Belw is a brief synpsis n this week s market events in the majr wheat rigins. US wheat: The US winter wheat crp is nw reprted t be 88% harvested which is up frm 84% last week. 15% f the US winter wheat crp is nw reprted t be within drught affected regins, which is up frm 13% last week. The suth Dakta winter wheat harvest is nw reprted t be 95% cmplete, while Mntana is reprted at 78% harvested as f August 4 th. Suth Dakta 2

3 and Mntana winter wheat yields are reprted t be gd with prtein being higher in the range f 12 13%. The average prtein f the US winter wheat harvest is nw reprted t be 11.4% which is up frm 11.3% last week. Average prtein has been steadily increasing as the harvest mved nrthward int drught affected regins. The US spring wheat crp is nw reprted t be 9% harvested, which is up frm 0% last week. The US spring wheat crp cnditin is reprted t be 31% gd/excellent, which is dwn slightly frm last week s estimates f 33% gd/excellent. Meanwhile, the crp percentage rated as pr/very pr, has increased frm 40% last week, t 43% this week. Accrding t the August 1 st USDA drught mnitr reprt, 56% f US spring wheat acres lie within the drught affected regins f the nrthern US plains Australian wheat: Australia has cntinued t have sme rains, but the nrtheast regin f the cuntry is still reprted t be dry and rain wuld benefit all regins. While last mnths WASDE reprt lwered Australian prductin estimates t 23.5 millin mt, Australian wheat prductin is nw thught t be in the range f 20 millin mt and thught t be getting smaller due t dryness. Argentine wheat: Accrding t a July 26th USDA gain reprt, Argentine wheat prductin is prjected at16.65 millin mt due t lwer seeded acreage. Abut 90% f Argentine wheat has been planted, but 100, ,000 hectares may nt be planted due t excess rain. Half f Argentine exprts are expected t ship t Brazil which will likely increase its imprts due t excess rain fllwed by harsh frsts. EU wheat: While France and Spain have had a dry seasn and disappinting yields, verall prjectins fr the Eurpean wheat crp are still thught t be higher vs last year with sme nrthern regins f Eurpe reprting persistent shwers. Harvest f Eurpean winter wheat is nw estimated t be abut 50% cmplete. Black Sea wheat: Russian wheat yields and crp estimates cntinue t rise and a pr-rata f Russia's current yield increase wuld argue fr a crp clse t 80 millin mt vs the USDA s last mnth estimate f 72 millin mt. The trade seems increasingly cmfrtable with a 75+ millin mt number which wuld leave an exprtable surplus f ver 35 millin mt. The Black Sea ended the week lwer with September Russian 12.5 paper buyable dwn t $195 and with mst f the selling interest in the past week being in the 11.5 pr and feed wheat markets pr clsed the week at a $15 discunt t 12.5 pr, and feed wheat clsing a further $13 less. Wheat Market Outlk: Significant events: The stats Canada jbs reprt n Friday revealed the lwest unemplyment rate in 9 years which is a sign f current ecnmic strength. While the value f the Canadian dllar has drpped slightly against the US dllar ver the week (currently at.7908 and dwn by fr the week) the recent jbs reprt des lend sme strength t the Canadian dllar against the US greenback. Hwever, the August 4 th US jbs reprt indicates that US unemplyment als fell t 4.3% frm last mnths 4.4%. While US unemplyment was already at 4.3% in May, this was a 16-year lw and it s likely that bth Canada and the US will cntinue with slw interest rate hikes t steady ecnmic grwth and cmbat inflatin. Any hike in interest rates will increase the value f the currency in that cuntry and will make that cuntries grain exprts mre expensive n the wrld market. 3

4 Outlk: Turkish and Russian wheat crps are bth reprted t be larger then previus estimates, while nrth American wheat seems verpriced n the wrld market. Prtein still remains at a significant premium and thse with high prtein wheat are nt selling. Nrth American wheat is currently t expensive and is nt cmpetitive n the wrld market, while Minnaplis HRS is als still vervalued vs HRW. We expect the spread between spring and winter wheat t narrw in the cming 1-2 mnths as spring wheat harvest nears cmpletin. The USDA s wrld supply and demand estimate reprt will be released n August 10 th and will be clsely watched. Expectatins are that the USDA will fllw the lead f ther agencies and will slightly reduce estimates fr wrld wheat prductin, while keeping estimates fr glbal ending wheat stcks largely unchanged. Cash wheat is current in the range f $7.17- $7.90 acrss the praries fr 2 CWRS Given that there is adequate glbal supply, and the prbabitly that there is little t n real shrtage f high prtein wheat, we expect hard red spring wheat t trade steady t lwer in the cming weeeks. iii) Primary Elevatr Price Tables and Grade Spreads Table 1: Canadian Primary Elevatr Bids, in Canadian Dllars per Bu and per MT 4

5 Table 2: Grade Spreads, in Canadian Dllars per Bu and per MT iv) FOB Wheat Prices and Exprt Basis Calculatin Backgrund and Ratinale: Reprting FOB prices at prt psitin and primary elevatr prices allws the reader t gain an understanding f bth lcal and internatinal wheat prices and t understand the relatinship between the tw, as measured by the exprt basis. Exprt basis can be defined as FOB prt psitin prices minus the primary elevatr prices at any given prairie delivery lcatin, and is therefre reflective f transprtatin csts plus any premiums being captured by terminal grain elevatr cmpanies r the railway cmpanies, at any given time. In general, a widening basis is indicative f decreasing system perfrmance in terms f either reduced prt capacity r rail service, r bth. A narrwing basis is indicative f increased available prt capacity and/r better ability f the railways t prvide ample service t grain shippers. In this regard, tracking these prices ver time has value bth in terms f prducers being able t time the selling f their grain but als in terms f evaluating and setting plicy related t varius transprtatin and capacity issues. Gray (2015) has calculated a nrmal basis t be in the range f C$72/tnne. During the 2013/14 crp year the exprt basis fr wheat widened t apprximately C$250/tnne, which indicated an inability f the grain handling and transprtatin system t adequately handle the recrd crp prduced that year. This ccurrence has highlighted the need t imprve the level f rail service and take measures t expand prt capacity where pssible. It has als underscred the need fr better price transparency and market infrmatin within the grain sectr. Assumptins, Definitins, and Methdlgy The fllwing backgrund infrmatin shuld assist in understanding and interpreting internatinal market signals and t relate them t the lcal Saskatchewan wheat market: 5

6 The price infrmatin generated fr the weekly reprt is designed t shw farmers at what price levels several wheat classes are trading at lcal primary elevatrs (Table 1) and in nearby internatinal markets (Table 3). T express the Exprt Basis 1 (see Exprt Basis in Table 3) defined as Cdn. FOB Prices minus primary elevatr bids, the FOB prices are translated int Cdn. dllars frm US dllars and cmpared t current actual primary elevatr Street prices at Rsetwn, Saskatchewan (see Street Prices in Table 3). Rsetwn is used as a prxy fr all primary elevatrs in the basis calculatin. The actual handling and transprtatin csts frm the West Cast t delivered elevatr (Rsetwn area) range frm ~C$58.00-C$74.72/mt, depending n number f cars mved and elevatr used. Apprximate relatinship between U.S. wheat classes and Canadian wheat classes: DNS 14% in the Pacific Nrth West (PNW) 1 CWRS 13.5% in Vancuver HRS in the Pacific Nrth West (PNW) 2 CWRS 13.0% in Vancuver HRW in the Pacific Nrth West (PNW) 3 CWRS in Vancuver SW (lwest price wheat) CPS red (mstly fed dmestically) HAD (Lakes) CWAD (Thunder Bay/ Lawrence) Abbreviatins: DNS (Dark Nrthern Spring Wheat); HRS (Hard Red Spring Wheat); HRW (Hard Red Winter Wheat); SW (Sft Wheat); HAD (Hard Amber Durum Wheat); CWRS (Canadian Western Red Spring Wheat); CPS (Canada Prairie Spring Wheat); CWAD (Canadian Western Amber Durum Wheat) Hard wheat price calculatins: Exprters in Western Canada generally derive their primary elevatr wheat prices frm HRS values at the West Cast (Pacific Nrthwest - PNW). Similarly, HRW values are used fr lwer grade (3) CWRS. West Cast HRS and HRW values essentially dminate the internatinal hard wheat trade and determine its basic value. If premiums are paid fr 1 CWRS 13.5, elevatr cmpanies are ften able t retain the premium Durum wheat price calculatins: The primary exprt rute fr Canadian durum wheat is still thrugh Thunder Bay, nt the West Cast f Canada. Nevertheless, the Pacific Cast has increased in imprtance fr durum ver time with 38% f ttal exprt vlume crp year t date. Italy is the single biggest buyer f Canadian durum wheat with 27% f ttal Canadian durum exprts YTD (East Cast shipments). Optinal rigin grain sales: Mst majr internatinal grain cmpanies sell ptinal rigin wheat t their custmers and ften cver their sales at best clser t the shipment psitin. The Canadian grain 1 Gray, R.S. (2015). The Ecnmic Impacts f Elevated Exprt Basis Levels n Western Canadian Grain Prducers 2012/13, 2013/14 and 2014/15. The difference between FOB Vancuver prices and the Saskatchewan elevatr cash bids t prducers is referred t as exprt basis: Basis can refer t the difference between any tw prices. As the largest vlume prt, Vancuver FOB, minus the elevatr bid prices representative measure f the exprt basis fr grains in Western Canada. 6

7 system is nt cnducive t servicing ptinal rigin sales because the vlume f wheat kept in strage in prt tday is much smaller than prir t deregulatin f the Canadian wheat market. Table 3: Relevant FOB Prices and calculated Basis, US & Canadian Dllars per MT 7

8 ADDENDUM Futures Driven Basis Calculatin, Canadian Dllars per MT 8