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WINNIPEG, Manitoba, Sept 20 (Reuters) - Canada's biggest wheat crop in more than two decades will send supplies from the No. 2 wheat exporter into unusual places, battling head-on with U.S. wheat, grain traders said.
Canadian farmers are expected to harvest 30.6 million tonnes of wheat this autumn, counting all varieties, according to Statistics Canada. Nearly two-thirds of the crop, or almost 20 million tonnes, is destined for export, Agriculture and Agri-Food Canada forecast this week.
Such ample supplies and expectations of lower-than-usual protein levels have created attractive prices for buyers, said Rhyl Doyle, director of export cereals for Paterson Grain.
"These kind of prices and protein profile will give us the tools to put it into a lot of places," he said. "If the price is right, that's the key, and our farmers are sellers."
Canada is the world's second-biggest producer of spring wheat, which is used to make breads, crackers and noodles, as well as the No. 2 producer of durum wheat, a main ingredient of pasta. The biggest Canadian grain handlers are Richardson International, Viterra and Cargill Ltd.
Canada Western Red Spring wheat with 12 percent protein was available this week at British Columbia ports for $283 per tonne, some 10 percent or $30 per tonne cheaper than U.S. hard red winter wheat with the same protein at the Gulf of Mexico, Doyle said.
"The Canadian prices will push Canadian wheat into a lot of hard red winter markets, even where you have a substantial freight disadvantage (from Canada)," Doyle said.
Wheat with mid-scale protein levels from Canada and the United States will vie for sales, particularly in Latin America and Africa, he said. This year, Canada looks to have smaller-than-usual supplies of high protein wheat (above 13 percent) that usually moves into western Europe and Asia, but there should be enough 13.0 percent protein wheat for Japan to make breads and noodles, Doyle said.
Canadian wheat was competing in traditional U.S. territory last year too, such as in the Philippines, said Todd Ross, director of trading for Lansing Olam Canada. That's likely a reflection of the move to an open Western Canadian grain market in 2012, similar to what happened in Australia after 2008, he said.
"When it was an open market, everybody went to find a place that was different and a margin could be gained," Ross said. "We're going to do the same thing here."
Wheat importers like Iraq, Iran and Saudi Arabia may also buy Canadian spring wheat to blend with lower-quality supplies from Europe or the Black Sea region, said a Canadian grain exporter who asked not to be named because he was not authorized by his company to speak publicly.
Protein content in wheat, which is important to the fermentation process in making bread, has an inverse relationship to yield. The more robust the yield, the lower the protein.
Last year, Canada Western Red Spring wheat averaged 13.9 percent protein, up from 13.1 percent in 2011 and 13.4 percent in 2010, according to the Canadian Grain Commission. Data for the current crop is not yet available.
Canada is not the only exporter with big wheat supplies. Wheat also looks ample in the Black Sea region and Australia.
"When a buyer raises his hand, he's going to have a lot of options," the wheat exporter said. "This will be a buyer's market and the sellers are going to have to get very creative."
U.S. wheat exports are off to a torrid pace in the marketing year that began June 1. U.S. exporters loaded and shipped more wheat for the week ended Sept. 12 to global buyers than any time in at least the past 23 years, with most of the grain headed for China and Brazil.
Canadian spring wheat will also face competition from U.S. hard red spring wheat. As in Western Canada, mild weather produced better-than-expected yields in the northern U.S. Plains, with lower protein content.
Canada exported 14.3 million tonnes of spring and winter wheat in the 2012/13 crop year, which ended July 31, up 7 percent from the previous year, according to the Grain Commission. Exporters shipped another 4.2 million tonnes of durum, up 18 percent.
Canada's biggest wheat markets were Japan, the United States and Indonesia.
For Canada to be competitive, it will have to overcome logistical challenges. Along with huge wheat production, Western Canada is expected to harvest a record-large canola crop.
Such high volumes are already straining the ability of Canadian National Railway Co and Canadian Pacific Railway Ltd to quickly move the grain to ports in British Columbia and Eastern Canada, where storage space has been hard to find, Ross said.
"We can buy it and sell it, we just can't move it today."