News Column

CWB PROs Mostly Higher in Latest Outlook for 2014-15

May 22, 2014



WINNIPEG, Manitoba, May 22 -- The Canadian Wheat Board issued the following news release:

CWB today released its Pool Return Outlooks (PROs) for the 2014-15 pools and Futures Choice pools. Compared to the last PRO release on April 24, projected wheat returns are $3 per tonne higher for the Annual and Winter pools, while the Early Delivery Pool remains unchanged. Projected returns for durum range from $6 to $11 per tonne higher. Canola projected returns for the Early Delivery and Annual pools are $10 and $4 per tonne higher, respectively, whereas the Winter Pool is unchanged. Malt barley and field peas projected returns are $10 and $18 per tonne higher, respectively.

See table here (http://www.cwb.ca/news/96/cwb-pros-mostly-higher-in-latest-outlook-for-2014-15).

Note: PROs are provided as price indications based on current nearby and forward markets. They are calculated basis track west coast or Thunder Bay ports, net of all projected operating costs, including CWB's pool management fee. Volatile market conditions may affect the PROs significantly. PROs are not price guarantees and should not be confused with initial payments. Farmers should consider entering pool contracts as an excellent risk-management tool that provides a solid return from the entire pooling period.

To calculate pool returns backed off to the farm, farmers should factor in country deductions that they negotiate directly with grain handlers. These deductions may vary at different times of the year.

PRO commentary

2014-15 pools

Wheat

Current Minneapolis wheat futures prices for the July 2014 contract through to December 2015 are in the range of $7.35 to $7.70 U.S. per bushel, which is up slightly from the last PRO release. Factors impacting futures markets continue to be the dryness in U.S. Southern Plains Hard Red Winter wheat crop, and planting delays in Western Canada, North Dakota and Minnesota. However, good planting progress in the U.S. Corn Belt has reduced concerns about corn and soybean production prospects. There continues to be some risk premiums built into the futures markets due to weather and the situation in the Ukraine.

Given current PRO assumptions, farmers in the 2014-15 Futures Choice Pools can expect to achieve a final return for 1 CWRS 13.5 in-store port position made up of the December 2014 futures value they lock in minus one to three dollars per tonne.

Durum

The durum market has shown some strength recently as durum stocks in Canada, E.U. and U.S. are projected to decline next crop year. Durum planting progress in Western Canada and North Dakota has been slower than normal as a result of cooler and wetter conditions in the last month, especially in North Dakota. Meanwhile, local crop problems in Turkey have resulted in increased import demand. There are also concerns about the Italian durum crop due to excessive precipitation.

Malting barley

Barley prices have improved since the last PRO release as a result of reduced seeded acreage globally, which is translating into tighter supplies in E.U. and Black Sea region in particular.

Canola

The canola PROs are based on the current futures market values plus projected forward basis levels. Present futures exhibit virtually no carry in the forward structure, which is unusual, but may be reflecting part of the influence of soybeans futures which are inverted due to tight carry-out supplies with large new crop supplies forecast.

Field Peas

Since the last PRO release, prices for field peas have improved significantly in part due to improving fluidity in the Canadian transportation system. Supply is starting to move more easily and this is helping to perk up demand.

General pool assumptions:

* Canadian dollar at 91 cents versus the U.S. dollar.

* Current forward futures structure for wheat and canola.

* The Early Delivery Pool reflects activity through the first half of the crop year, with sales to be executed by the end of February 2015 (farmer deliveries by the end of January).

* The Annual Pool reflects activity through the entire crop year, with sales to be executed by the end of August 2015 (farmer deliveries by the end of July).

* The Winter Pool reflects activity through the second half of the crop year, with sales to be executed by the end of August 2015 (farmer deliveries by the end of July).

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