Dollar, volatility weigh on November PROs: CWB

The Canadian dollar and “highly volatile” wheat futures markets during November have pressured most wheat grades in the Canadian Wheat Board’s latest pool return outlook (PRO).

In its release Thursday, the CWB cited the loonie’s rise in value as the “primary” reason for the decline in the November 2007-08 PROs for milling wheat and durum.

PROs for most milling wheats were down $6 per tonne from October, except for No. 4 CWRS, up $3 to $259 per tonne, and CW Feed, up $10 to $230 per tonne.

Though the dollar has fallen somewhat from its early-November peak of US$1.10, major banks expect it to remain at parity or slightly above the U.S. dollar for the next year. That will drag on Prairie farmers’ returns because grains and oilseeds are sold in U.S. dollars, the board said.

Adding to international volatility were a spike in Russian wheat exports ahead of a 10 per cent export tax imposed Nov. 12 and the pending Argentinean wheat harvest, offset by news of widespread frost through southern Argentina’s wheat-growing areas.

Durum PROs were down by between $4 and $6, with No. 1 CWAD 14.5 down $4 to $467 per tonne, No. 4 CWAD down $4 to $433 per tonne, No. 1 CWAD 12.5 down $6 to $461, and No. 3 CWAD down $5 to $444. No. 5 CWAD was also up $10 to $230 per tonne.

The durum market is expected to remain tight until summer at the earliest, the CWB said, but world durum prices dropped slightly in November “due to lack of nearby demand” as mills are generally covered for the next few months and are also rationing demand due to historically high prices.

Feed barley PROs (No. 1 CW, Pool A) remained flat at $254 per tonne, while the CWB issued its first PRO for the 2007-08 Pool B, which runs from Feb. 1 to July 31, 2008 and has an initial value of $245 per tonne. Tight global feed grain supplies are expected to ease as the record U.S. corn crop comes up for export and new-crop corn will be available from South America in the spring.

PROs for two-row designated malting barley are down $3 per tonne, while six-row designated barley PROs remained flat. The quality of the Canadian and U.S. malt barley crops and frost in Argentina are supporting prices, although demand is “sluggish” as buyers are well covered, the CWB said.