Canada Markets

CWB Pares Winter Pool Wheat Price Potential

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The January 22 CWB Pool Return Outlook provides insight into the challenges expected in the last half of the crop year for CWRS wheat, with the Pool Return Outlook for the Winter Pool reduced by $25/mt since the Dec. 18 release. (DTN graphic by Nick Scalise)

After four consecutive increases in the CWB's Pool Return Outlook for CWRS wheat, the January PRO for the Winter Pool was slashed by $25 per metric tonne to reflect the declining futures prices, while the drop was partially offset by the declining value of the Canadian dollar.

Shown on the attached chart is the trend in the Early Delivery Pool for 1 CWRS 13.5% protein, which represents grain marketed between August 2014 and January 2015, the Annual Pool, which represents grain marketed over the crop year from August 2014 to July 2015, also full, along with the Winter Pool, which represents grain marketed from February through July. The latter is the only Pool available for signup this crop year.

The Winter Pool PRO reached a high of $325/mt for the 1 CWRS 13.5% in the CWB's December 18 release, which coincidentally was the same day the MGEX March HRS contract hit a chart high of $6.80 1/4/bu. This is 20 1/2 cents higher than the previous close, while the close for the day was only 1 1/4 cents higher, indicating a waning bullish sentiment with bears slowly taking control. This day marked the start of the downtrend which remains in place today.

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Since that day, the March contract has moved $1.02/bu lower from the high in December to a point in time Friday morning, a 15% drop, a move which has been tempered by a more than 6% drop in the Canadian dollar, with electronic trade at $.8058 CAD/USD in morning trade.

The Winter Pool may face further pressure with wheat markets struggling to find support. The March HRS contract is poised to post a lower close for the fifth consecutive week. Technical support may be found at a previous weekly low of $5.56/bu, while a move below this level could result in a move to the October low in the March contract of $5.41/bu.

Thursday's International Grains Council reminds us of a well-supplied global market, with global production left unchanged from their previous report wile consumption was reduced by 4 mmt and ending stocks boosted by 3 mmt to 196 mmt, which is also consistent with the USDA. This is close to the highest global carryout seen in almost four years.

The latest Winter Pool for 1 CWRS 13.5% protein is reported at $300/mt in store Vancouver or St Lawrence ports, which compares to the last posted Early Delivery Pool PRO of $270/mt and the last Annual Pool PRO of $303/mt.

The latest report also trimmed the Winter Pool PRO for durum by $4/mt to $476/mt for 1 CWAD 13% protein, the third consecutive drop (not shown). Despite a $19/mt drop since the high of $495/mt reported on Nov. 6, the last half of the marketing year could result in the highest returns, with the $476/mt PRO in the Winter Pool currently compared to the last Annual Pool PRO of $463/mt and the last Early Delivery pool PRO of $393/mt for the highest durum quality reported.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

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