Global Financial Problems and Increased Wheat Production Pressure Grain Markets

by 5m Editor
6 October 2008, at 12:05pm

The Canadian Wheat Board reports problems in global financial markets combined with strong worldwide grain production continue to pressure commodity markets, writes Bruce Cochrane.

The Canadian Wheat Board's September Pool Return Outlook for the 2008-09 crop year shows a C$27-31 per tonne decline in projected wheat values, a drop of five to $31 for durum and a $23 drop for feed barley from August and a $13 dollar per tonne drop in designated barley from mid-September.

Weather and market analysis director, Bruce Burnett, says the problems in the financial markets have spilled over into the commodities so we have seen commodity prices dip considerably over the past two weeks.

Bruce Burnett - Canadian Wheat Board

There have been a couple of factors here on the fundamental side in the world grain markets.

Certainly wheat production continues to be at record levels in a number of parts of the world.

And, despite the fact that we're looking at some diminished crop potential in parts of the southern hemisphere, Australia and Argentina, it looks like the world wheat crop this year is pretty large and certainly on the lower quality end of the wheat side.

Places like the Black Sea and Europe certainly have pressured those markets down considerably.

Add to that some of the credit problems and issues that are emanating from the United States.

It creates pressures on the markets because people are starting to liquidate assets to get into a cash only mode so that really also that puts some pressures on both the commodities futures markets as well as the cash prices.

Mr Burnett says hopefully we will see some stability in the markets as the US Congress looks at the credit package for Wall Street.

However, he observes, it certainly has been a rough ride over the past couple of months.

5m Editor