from this weeks agriweek
<b>Western wheat growers get their annual sticker shock experience</b>
American wheat prices still may not have peaked in their historic pre-harvest rally. Between June 1 and July 25, Chicago soft red winter wheat futures for December 2010 gained 26%, Minneapolis hard red spring wheat 25% and Kansas City 22%. Prices were above $6 a bushel after a brief dip, with new contract highs on July 27. U.S. wheat futures are all substantially higher than a year ago. Last week the December future in Chicago was at $6.15 a bushel compared to $5.39 a year ago, Minneapolis $6.76 against $6.11 and Kansas City $6.30 vs. $5.63. Basis widened, so cash prices did not advance in step with the futures, but the cash wheat situation for American farmers is turning out very satisfactorily indeed.
This is midway through the harvest,the time of the year’s lowest cash prices. A straight conversion of Chicago futures to Canadian dollars per tonne puts Chicago wheat at $245, Minneapolis at $252 and Kansas City at $247. Last week cash prices in North Dakota for instant payment after all costs and charges, for dark northern spring wheat before any protein premiums, were the Canadian equivalent of $195 to $219 a tonne. <b>The Canadian Wheat Board’s prices are headed decidedly in the opposite direction. It announced stunningly-low initial payments for the crop year starting Aug. 1. The top milling wheat grade is at $128 a tonne before elevator and freight deductions of $45 to $57. Net on delivery will be about $2 a bushel, a price right out of the 1970s. If the Board’s pool return guess of prices eventually to be received for the 2010 crop is correct, farmers will realize about $155 a tonne($4.21/bu) after adjustment and final payments for what is supposed to be the best wheat in the world.</b> For the best durum in the world, the initial price is $119 a tonne at port or about $1.82 a bushel in the grower’s pocket. The 2010-11 pool return outlook estimate for durum is $200 a tonne before freight or under $150 after deductions.
The initial price for feed wheat, of which there could be quite a quantity in 2010, is a laughable $78 a tonne or less than $1 a bushel after deductions. The estimated final return for feed wheat is $152 a tonne($3.26/bu), or about 20% less than the cash price for U.S. corn in the northern states. The off-Board price in Saskatchewan at the elevator door is currently about $137 a tonne.
The Board’s initial and anticipated total payments for barley are higher than for wheat: two-row malting gets an initial payment of $138 a tonne before deductions and the Board supposes that it will eventually pay $214. Its initial price for feed barley at $88 a tonne less deductions is under a dollar a bushel, a price right out of the 1960s. Its estimated pool return price after deductions is about $2 a bushel. Feed barley prices in the off-Board cash market are currently about $125 in Saskatchewan and above $135 a tonne in the Alberta feedlot belt.
Initial payments are the down payment under the Board’s pooling system. As the crop year unfolds initial payments are increased and interim payments made. However in the now-ending 2009-10 crop year the initial payment for milling wheat was raised only once by only $10 and the durum payment was not increased at all. At the start of 2009-10 initial payments before deductions were $178 for milling and $183 for durum wheat. At the start of 2008-09 they were $263 and $330 respectively, with final returns of $302 and $373. The latest initial prices for Wheat Board wheat are 61 to 64% of the anticipated pool return. Historically they have been closer to 70%. Word is that federal finance officials, having regard for the government guarantees of the final payments and all other Wheat Board obligations, indicated that higher amounts would not be approved. However the difference is small considering how cheaply the Board expects to sell 2010-crop prairie wheat. There also appears to be a possibility that the Board will run a deficit in the 2009-10 durum wheat pool (paying out more to farmers than it receives from customers). In June 2009 the Board issued a pool return outlook price for 2009-10 durum of $295 a tonne. Its latest published asking price was $278 a tonne at Vancouver or St. Lawrence positions and has been lower during much of the 2009-10 crop year. Only the Board and its customers know prices exactly.
Wheat growers can take the Board’s early payment option and receive an amount related to the pool return outlook price, subject to an arbitrary penalty assessed by the Board which is three or four times greater than interest on money borrowed against the deferred payments. Interest-free government cash advances are also available, further reducing the value of this option. Growers can also sell under an assortment of basis contracts for nearly-immediate settlement in full but at prices set by the Board, not visibly determined on any public market.
With the small 2010 crop and extra expenses that most growers incurred because of the difficult spring season, these insulting prices will be the last straw.
<b>Western wheat growers get their annual sticker shock experience</b>
American wheat prices still may not have peaked in their historic pre-harvest rally. Between June 1 and July 25, Chicago soft red winter wheat futures for December 2010 gained 26%, Minneapolis hard red spring wheat 25% and Kansas City 22%. Prices were above $6 a bushel after a brief dip, with new contract highs on July 27. U.S. wheat futures are all substantially higher than a year ago. Last week the December future in Chicago was at $6.15 a bushel compared to $5.39 a year ago, Minneapolis $6.76 against $6.11 and Kansas City $6.30 vs. $5.63. Basis widened, so cash prices did not advance in step with the futures, but the cash wheat situation for American farmers is turning out very satisfactorily indeed.
This is midway through the harvest,the time of the year’s lowest cash prices. A straight conversion of Chicago futures to Canadian dollars per tonne puts Chicago wheat at $245, Minneapolis at $252 and Kansas City at $247. Last week cash prices in North Dakota for instant payment after all costs and charges, for dark northern spring wheat before any protein premiums, were the Canadian equivalent of $195 to $219 a tonne. <b>The Canadian Wheat Board’s prices are headed decidedly in the opposite direction. It announced stunningly-low initial payments for the crop year starting Aug. 1. The top milling wheat grade is at $128 a tonne before elevator and freight deductions of $45 to $57. Net on delivery will be about $2 a bushel, a price right out of the 1970s. If the Board’s pool return guess of prices eventually to be received for the 2010 crop is correct, farmers will realize about $155 a tonne($4.21/bu) after adjustment and final payments for what is supposed to be the best wheat in the world.</b> For the best durum in the world, the initial price is $119 a tonne at port or about $1.82 a bushel in the grower’s pocket. The 2010-11 pool return outlook estimate for durum is $200 a tonne before freight or under $150 after deductions.
The initial price for feed wheat, of which there could be quite a quantity in 2010, is a laughable $78 a tonne or less than $1 a bushel after deductions. The estimated final return for feed wheat is $152 a tonne($3.26/bu), or about 20% less than the cash price for U.S. corn in the northern states. The off-Board price in Saskatchewan at the elevator door is currently about $137 a tonne.
The Board’s initial and anticipated total payments for barley are higher than for wheat: two-row malting gets an initial payment of $138 a tonne before deductions and the Board supposes that it will eventually pay $214. Its initial price for feed barley at $88 a tonne less deductions is under a dollar a bushel, a price right out of the 1960s. Its estimated pool return price after deductions is about $2 a bushel. Feed barley prices in the off-Board cash market are currently about $125 in Saskatchewan and above $135 a tonne in the Alberta feedlot belt.
Initial payments are the down payment under the Board’s pooling system. As the crop year unfolds initial payments are increased and interim payments made. However in the now-ending 2009-10 crop year the initial payment for milling wheat was raised only once by only $10 and the durum payment was not increased at all. At the start of 2009-10 initial payments before deductions were $178 for milling and $183 for durum wheat. At the start of 2008-09 they were $263 and $330 respectively, with final returns of $302 and $373. The latest initial prices for Wheat Board wheat are 61 to 64% of the anticipated pool return. Historically they have been closer to 70%. Word is that federal finance officials, having regard for the government guarantees of the final payments and all other Wheat Board obligations, indicated that higher amounts would not be approved. However the difference is small considering how cheaply the Board expects to sell 2010-crop prairie wheat. There also appears to be a possibility that the Board will run a deficit in the 2009-10 durum wheat pool (paying out more to farmers than it receives from customers). In June 2009 the Board issued a pool return outlook price for 2009-10 durum of $295 a tonne. Its latest published asking price was $278 a tonne at Vancouver or St. Lawrence positions and has been lower during much of the 2009-10 crop year. Only the Board and its customers know prices exactly.
Wheat growers can take the Board’s early payment option and receive an amount related to the pool return outlook price, subject to an arbitrary penalty assessed by the Board which is three or four times greater than interest on money borrowed against the deferred payments. Interest-free government cash advances are also available, further reducing the value of this option. Growers can also sell under an assortment of basis contracts for nearly-immediate settlement in full but at prices set by the Board, not visibly determined on any public market.
With the small 2010 crop and extra expenses that most growers incurred because of the difficult spring season, these insulting prices will be the last straw.
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