Farmers won’t offset losses from reduced canola prices by planting wheat.
That was the inference from grain trader Marlena Boersch’s wheat market outlook to a Sask. Wheat workshop in Moose Jaw.
The math is simple. Global wheat production is estimated to increase by three per cent while consumption will only increase one per cent, she said.
The good news: global wheat stocks fell nine million tonnes, or three per cent, last year with carryover in top exporting countries falling by 14 million tonnes.
Wheat price outlook will be impacted by any bad weather conditions and the current U.S./China trade talks.
“We would hold new crop sales for now because we don’t know what is happening to China and the U.S.,” said the Winnipeg-based analyst.
She has concerns that lower global growth will reduce the ability to purchase wheat in developing countries.
“Consumers in those countries spend a big chunk of their income on food. Slow growth cuts into purchasing power.”
Over the long-term, Boersch suggested Canadian wheat faces stiffer competition from Russia and the Ukraine and improved infrastructure.
“In 1976 Canada was one of the lowest cost producers of wheat. Land prices were low. That is no longer the case.”
Canada is now a high cost wheat producer.
Lower costs in Russia, Kazakhstan and Ukraine allow them to play with margins when selling wheat.
During the last 15 years, Russia increased export capacity nine-fold and plans to add more capacity.
Brazil is talking with four grain companies to let them take over the main grain route to port.
China has invested $42 billion on railway transport through Kazakhstan for the Silk Road from Shanghai to Dusseldorf, Germany.
“They are designing cheap infrastructure. We can’t even build a pipeline.”
Our wheat buyers, Iran and Pakistan, are talking with Russia about co-operation on exports, she said.
Increased Canadian port capacity will help but “what is always missing is the railways to feed them. We have to get a handle on that.
“We've got to be able to get our grain to the market when the market is there.
“The world around us is changing so much more rapidly than it has in the last 35 years.”
Five years ago, Saudi Arabia bought 440,000 tonnes of Canadian wheat. This year: none due to a human rights issue tweet by External Affairs Minister Chrystia Freeland
“I like Chrystia Freeland but I think you shouldn’t over tweet.”
Ron Walter can be reached at ronjoy@sasktel.net
