From this weeks Agri-week.
<b>The Wheat Board is slashing 2010-11 price expectations faster than ever</b>
As the situation in world wheat markets continues to deteriorate, the inability of the Canadian Wheat Board single-desk marketing system to deliver competitive returns to growers becomes clearer and clearer. Even with the current 2009-10 crop year more than half over, the Board continues to deeply cut price expectations for its monopoly crops while international prices have largely stabilized.
In its latest monthly pool return outlooks issued at the end of March, anticipated prices for milling wheat for the 2010-11 crop year starting Aug. 1, were cut by another $14 to $16 a tonne from the February report. The Board expects to pay $222 a tonne for No. 1 CW red spring wheat with 13.5% protein, down $14 or 6%. The expected price for feed wheat dropped $14 to $145 per tonne, or under $100 net to the grower. Durum values for the new crop year also were dropped by $10 to $14 per tonne with 1CW at $192 per tonne or about $141 net to a mid-prairies grower. Feed barley returns for Pool A were cut by $7 a tonne from February to $143. Projected malting barley returns are $182 a tonne, $8 lower than in the February report.
The Board also lowered pool return estimates for the current 2009-10 crop year which ends July 31. Wheat values were reduced by $4 to $6 a tonne for all grades, durum by $6, malting barley by $2 and feed barley by $7 compared to February. In February the Board raised some wheat projections by up to $5 a tonne. The Board said it has priced 73% of expected 2009-10 wheat deliveries and will reach 90% by May 31. No 2010-11 grain has been pre-sold yet, but it is expected that about 25% will have been priced by Sept. 30.
Reductions in pool return estimates are much bigger than they look. Since the price is based on in-store Vancouver or St. Lawrence ports, the latest one-month drop in the farm-gate price is more like 9%. As these prices drop, elevator and freight charges take an increasing percentage of its value; in the case of durum over 26% of the Board’s projected price will now be consumed by these costs.
To appreciate how drastic the impact is on the grower, consider that at these prices and last year's average yields in Saskatchewan malting barley will provide a gross revenue per acre of about $160 per acre compared to $135 for durum wheat. The Wheat Board expects a 25% decline in durum acreage in western Canada this year, an estimate that is now sure to be on
the low side. In most recent years the prices actually paid by the Board were several dollars per tonne lower than projected in the March monthly reports. If actual payments (which will not be calculated until July 2011) drop just another $9 a tonne, final prices for 2010-11 will be the lowest since 2005-06 and lower than in any year since 2000 except three (2003-06). The Board’s pool return estimates, which are intended to give wheat and barley growers guidance as to the price outlook and to substitute for price signals sent out by open markets, can be grossly misleading. All 2009-10 prices are down drastically
since the first report for the crop year issued in February 2009. Here are the comparisons: top grade milling wheat $238 ($289 in February 2009), durum $196 ($303), feed wheat $140 ($198), feed barley $143 ($161) and malting barley $209 ($263).
The price slide for Canadian wheat is looking like the deepest of any major wheat-producing country. There is no putting a good face on the world situation in wheat, but this continuous drop in Board prices amounts to an emergency for the western grain economy. No wheat producer, no matter how efficient or how favorable the new growing season turns out to be, will make a net margin over costs from the prices the Board is indicating. The monopoly system is locking in, by federal law, serious losses for all 2010 production in western Canada. The situation is so dire that it justifies extraordinary action by the government to permit western growers at least temporarily the chance to try to do better on
their own.
<b>The Wheat Board is slashing 2010-11 price expectations faster than ever</b>
As the situation in world wheat markets continues to deteriorate, the inability of the Canadian Wheat Board single-desk marketing system to deliver competitive returns to growers becomes clearer and clearer. Even with the current 2009-10 crop year more than half over, the Board continues to deeply cut price expectations for its monopoly crops while international prices have largely stabilized.
In its latest monthly pool return outlooks issued at the end of March, anticipated prices for milling wheat for the 2010-11 crop year starting Aug. 1, were cut by another $14 to $16 a tonne from the February report. The Board expects to pay $222 a tonne for No. 1 CW red spring wheat with 13.5% protein, down $14 or 6%. The expected price for feed wheat dropped $14 to $145 per tonne, or under $100 net to the grower. Durum values for the new crop year also were dropped by $10 to $14 per tonne with 1CW at $192 per tonne or about $141 net to a mid-prairies grower. Feed barley returns for Pool A were cut by $7 a tonne from February to $143. Projected malting barley returns are $182 a tonne, $8 lower than in the February report.
The Board also lowered pool return estimates for the current 2009-10 crop year which ends July 31. Wheat values were reduced by $4 to $6 a tonne for all grades, durum by $6, malting barley by $2 and feed barley by $7 compared to February. In February the Board raised some wheat projections by up to $5 a tonne. The Board said it has priced 73% of expected 2009-10 wheat deliveries and will reach 90% by May 31. No 2010-11 grain has been pre-sold yet, but it is expected that about 25% will have been priced by Sept. 30.
Reductions in pool return estimates are much bigger than they look. Since the price is based on in-store Vancouver or St. Lawrence ports, the latest one-month drop in the farm-gate price is more like 9%. As these prices drop, elevator and freight charges take an increasing percentage of its value; in the case of durum over 26% of the Board’s projected price will now be consumed by these costs.
To appreciate how drastic the impact is on the grower, consider that at these prices and last year's average yields in Saskatchewan malting barley will provide a gross revenue per acre of about $160 per acre compared to $135 for durum wheat. The Wheat Board expects a 25% decline in durum acreage in western Canada this year, an estimate that is now sure to be on
the low side. In most recent years the prices actually paid by the Board were several dollars per tonne lower than projected in the March monthly reports. If actual payments (which will not be calculated until July 2011) drop just another $9 a tonne, final prices for 2010-11 will be the lowest since 2005-06 and lower than in any year since 2000 except three (2003-06). The Board’s pool return estimates, which are intended to give wheat and barley growers guidance as to the price outlook and to substitute for price signals sent out by open markets, can be grossly misleading. All 2009-10 prices are down drastically
since the first report for the crop year issued in February 2009. Here are the comparisons: top grade milling wheat $238 ($289 in February 2009), durum $196 ($303), feed wheat $140 ($198), feed barley $143 ($161) and malting barley $209 ($263).
The price slide for Canadian wheat is looking like the deepest of any major wheat-producing country. There is no putting a good face on the world situation in wheat, but this continuous drop in Board prices amounts to an emergency for the western grain economy. No wheat producer, no matter how efficient or how favorable the new growing season turns out to be, will make a net margin over costs from the prices the Board is indicating. The monopoly system is locking in, by federal law, serious losses for all 2010 production in western Canada. The situation is so dire that it justifies extraordinary action by the government to permit western growers at least temporarily the chance to try to do better on
their own.
Comment