Domestic supply tightness may boost Canada’s wheat prices
Canada’s wheat supply looks a bit unpromising in the coming year after sowing was impacted by a severe drought in the US Northern Plains and Canadian Prairies, and by summer wildfires that burned over a million acres in British Columbia in 2021.
Supply tightness in the domestic market along with concerns over volumes from Russia and Australia could boost Canadian wheat prices in 2022, market sources said.
Production down sharply
Canada’s total wheat production is seen falling 38.5% from marketing year 2020-21 (August-July) to 21.7 million mt in MY 2021-22, Statistics Canada said, with drought and warm temperatures likely to impact output. In MY 2021-22, wheat crop yields are expected to fall 33.3% on the year to 34.8 bushels/acre, while harvested area will likely be down 7.7% from 2020-21, at 22.8 million acres.
This will eventually weaken the pace of shipments from one of the world’s largest wheat exporters, sources said.
Canada’s wheat exports are expected to be limited in MY 2021-22, simply because there is not enough exportable supply available, Jon Driedger, wheat analyst at Manitoba-based LeftField Commodity Research, said.
Canada’s wheat exports for MY 2021-22 are estimated at 16.1 million mt, a sharp 40% fall from the previous year, according to Agriculture and Agri-Food Canada.
The US Department of Agriculture has pegged Canada’s wheat exports at 15 million mt for MY 2021-22, with Australia toppling Canada to become the world’s fourth-largest wheat exporter.
Logistical concerns hit shipments
Canada’s wheat exports have also been hit over the past few weeks as Vancouver, the largest port, has been struggling to process the inflow and outflow of cargoes.
British Columbia was ravaged by severe floods, which forced authorities to cut off the area from several major roads and railways. Some of the major transportation lines have reopened, while several others are still recovering from landslides that dismantled entire transportation networks, according to local media reports.
The port transported a record amount of goods over the past one year due to a boom in consumer demand.
This was the second time in less than five months that the port has been impacted by extreme weather conditions. During the summer, wildfires and a record heat wave caused a backlog of dozens of ships, which was followed by floods.
However, some traders are hopeful that the backlog may be manageable if railway services are not disrupted.
“As long as railways are not disrupted further, I think these delays will have a minimum impact on FOB exports. Tough to sell wheat anyway, and the stocks at port currently should be able to suffice any nearby vessel requirements,” a source said.
Opportunity for Canada?
With Russia hiking export taxes on wheat and planning to introduce import quotas between February and June, demand for Canadian wheat may be boosted, analysts and sources said.
Russia is the world’s largest wheat exporter.
The country, which mainly supplies wheat to the Middle East and Africa, launched its formula-based tax for all grain exports from June as part of measures to check domestic inflation.
Russia’s export taxes are based on a complex formula, leading to tax changes on a weekly basis.
Russia recently announced it may change the formula that impacts all grain exports out of the country.
Eduard Zernin, who heads the Russian union of grain exporters, said he expects Russia to set the quota by Feb. 15.
Canada is expected to benefit from the reduction in Russia’s exports because it will drive up global wheat prices, trade sources said.
Similarly, concerns over tightening supplies of premium quality wheat from Australia are expected to push up demand for Canadian wheat. Canada and Australia are key suppliers of milling wheat.
Eastern Australia has been experiencing adverse weather conditions over the past few weeks, leading to a decline in the output of Australian Premium White wheat. Most parts of Australia, especially New South Wales, have been receiving heavy showers due to the emergence of the La Niña phenomenon.
Preliminary results from Australia’s wheat harvest indicate that the share of higher-protein content wheat is expected to shrink from the usual 65%-70% to about 35%-45% this year, leading to a tightness in the supply of milling quality wheat.
Soaring global prices
Canada’s wheat prices are seen tailing the global trend for the food grain. Global prices rose to a near decade high a few weeks ago, before softening slightly.
“Our outlook for Canadian spring wheat prices is supportive. Global wheat prices will be an important factor, and these have been correcting downward. This will act as a headwind for Canadian prices in the shorter term,” Jon Driedger said.
Along with tight domestic supplies, robust domestic demand for feed wheat could eventually allow them to rebound later into winter and spring, according to Driedger.
With milling wheat supply from Australia declining and government interventions restricting exportable surplus from Russia, Canadian crop prices are expected to gain.
Read also
Ukraine is ready to help Syria prevent food crisis – Zelenskyy
Join with the EARLY RATE – 22 International Conference BLACK SEA GRAIN.EUROP...
Brazil sugar output decreased by 23% — Unica
Algeria imposes a complete ban on durum wheat imports in 2025
Weather in Brazil and Argentina remains favorable for the future harvest of soybea...
Write to us
Our manager will contact you soon