By Julie Ingwersen
CHICAGO, Sept 8 (Reuters) - Canada's spring wheat harvest could be larger than expected, adding to ample global supplies, crop analysts said, but quality has been variable, keeping stocks of wheat for making bread in tight supply.
Statistics Canada on Aug. 31 put the country's total wheat crop at 25.5 million tonnes, a six-year low. But analysts expect that figure, based on farm surveys conducted in late July, to rise in subsequent reports. traders are 90 percent certain the Canadian wheat number is going up," said Ken Ball, senior commodity adviser with PI Financial.
With Canada's spring wheat harvest approaching the halfway mark, yields are "still not terrific, but not as bad as some of the worst fears," said Dave Reimann, risk manager for Cargill's MarketSense program.
Canada's wheat had been hit by rains in the northern prairies during spring planting and then by a summer drought that scorched southern areas near the U.S. border, leading to concerns that yields could suffer.
The drought also gripped North Dakota and Montana, major U.S. spring wheat states, and concerns about damage to wheat output sent front-month MGEX spring wheat futures 1MWEc1 above $8 a bushel in July for the first time in four years.
The price spike triggered a wave of farmer selling on both sides of the border. U.S. producers, who have ample storage, unloaded old-crop supplies while Canadians made forward sales against their 2017 harvest.
But as the crop rolls in, yields have been stronger than expected, especially in Manitoba, Canada's third-largest wheat province after Saskatchewan and Alberta.
Canada's poorest yields emerged in southern Saskatchewan, bordering the U.S. states that endured extreme drought.
"There was kind of a stigma on western Canada that we were having the same conditions as North Dakota and Montana. But that only extended 30 to 40 miles above the border. Once you got farther north, it was considerably better." said Jerry Klassen, manager at trading house GAP SA Grains and Produits.
The harvest was 38 percent complete in Saskatchewan by Monday and 31 percent complete in Alberta by Tuesday. The spring cereal harvest was 60 to 100 percent complete in central Manitoba. GRO/SAS GRO/ALB GRO/MBA
MGEX spot spring wheat futures fell close to $6 a bushel last week although the benchmark December contract 1MWEZ7 had a modest bounce this week, settling at $6.46-3/4.
Futures gained some support from the Canadian dollar's CAD= jump to a two-year high this week in theory lowering cash wheat prices paid to Canadian farmers and chilling wheat export prospects. (Graphic: http://reut.rs/2jc2fDp )
PATCHY PROTEIN
While the harvest overall may be better than feared, protein levels -- one indication of wheat's quality -- have been variable in Manitoba and elsewhere. High-protein wheat has been one area where supplies are tight globally despite a glut of grains. have heard all over the map -- some good, some surprisingly low. It seems like a lot of variability." said Reimann. The Canadian Grain Commission will only release information on the quality of the 2017 Canadian wheat crop in October.
"We are still going to have a pretty tight protein wheat market, but it won't be as tight as we thought a month ago," Ball said.