Canadian Wheat Supplies Plunge 30 Percent After Drought Hurt Crops

February 5, 2008
By Tony C. Dreibus and Greg Quinn
Bloomberg

Canada, the world's second-largest wheat exporter, said its inventories of the grain plunged 30 percent after drought hurt crops in southern growing areas and cool, wet weather damaged plants in the north.

Stockpiles including durum totaled 15.15 million metric tons on Dec. 31, down from 21.57 million tons a year earlier, Statistics Canada said today in a report. Excluding durum, supplies fell 30 percent to 12.28 million tons. Rising demand also helped erode inventories, especially for high-protein spring and durum wheat used to make bread and pastas.

Dwindling global inventories have helped send wheat prices to records in recent months. Wheat has more than doubled during the past year on the Chicago Board of Trade, reaching $10.095 a bushel on Dec. 17, the highest ever. At the Minneapolis Grain Exchange, where high-protein spring varieties trade, futures have nearly tripled from a year ago.

``This is a perfect example of inelastic demand,'' because consumers need wheat for food staples and are likely to keep buying even as prices rise, said Larry Weber, owner of Weber Commodities Ltd. in Saskatoon, Saskatchewan.

In Minneapolis, wheat futures for March delivery rose the exchange limit of 30 cents, or 2.1 percent, to a record $14.63 a bushel. On the Winnipeg Commodities Exchange in Manitoba, March wheat climbed C$5, or 2.1 percent, to C$240 ($238.08) a metric ton and is up 47 percent in the past year.

BIGGEST DROP SINCE 1988

The drop in supplies in storage was the largest year-over- year decline on Dec. 31 since 1988, when inventories fell 47 percent, according to Statistics Canada. Stockpiles fell to the lowest for the date since 2002, the agency said.

``The big thing was the crop size,'' said Greg Kostal, president of Kostal Ag Consulting in Winnipeg.

Canadian farmers probably will harvest an estimated 20.1 million metric tons of wheat in the marketing year that ends July 31, down 21 percent from the previous year, Ottawa-based Statistics Canada said in a Dec. 6 forecast. Spring-wheat production was pegged at 13.9 million tons, down 26 percent, the agency said.

Barley stockpiles fell 4.9 percent to 7.11 million tons as of Dec. 31 and canola dropped 9.3 percent to 6.5 million tons, Statistics Canada reported.

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