SASKATOON – Canadian wheat sold for an average of 22 cents a bushel more than American wheat in world and domestic markets in 1995-96.
But higher transportation and handling costs in Canada meant farmers on this side of the border actually took home less money from the elevator than their U.S. counterparts.
The U.S. Department of Agriculture recently estimated the average farmgate price for all wheat sold by American farmers in the last marketing year was $6.23 (Cdn). Meanwhile, the Canadian Wheat Board’s estimated 1995-96 pool return for top grade wheat is $5.73, on-farm in central Saskatchewan.
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Looking ahead to 1996-97, the USDA is forecasting a price range of $5.96 to $6.78 a bushel, while the CWB’s latest pool return outlook projects a Saskatchewan farmgate price of about $5.28 a bushel.
To some, those numbers show the board is being outperformed by U.S. grain merchants.
That’s how it looked to Barrie Malo, a Wolseley, Sask., farmer and director of the Western Canadian Wheat Growers Association.
In a recent letter to The Western Producer, Malo used those figures to conclude that the Canadian marketing agency is doing a lousy job.
“Why is it that … the Canadian Wheat Board cannot sell the best wheat in the world for a price which nets Canadian farmers at least as much as American farmers net for a lower quality product?” he wrote.
But wheat board market analyst Larry Sawatzky said if apples are compared with apples, Canadian farmers actually fared better than their southern neighbors.
The average farmgate price for all wheat sold by the CWB in 1995-96 was $6.05 a bushel, 18 cents a bushel below the U.S. price. But Sawatzky said those prices include freight and handling charges, which in 1995-96 were on average 40 cents a bushel lower in the U.S. than in Canada. If those costs are taken out of the equation, it shows the board received 22 cents a bushel more out of the market than U.S. exporters.
Higher farmgate price
For farmers, the bottom line remains that the U.S. farmgate price was higher in 1995-96.
But Sawatzky contends those figures are not a reflection on the board’s performance.
“That fact that our transportation and handling costs are higher in Canada is not the fault of the wheat board,” he said.
Handling and transportation costs are lower in the U.S. because the system was vastly overbuilt as a result of government subsidies in the 1970s and 1980s. Also, some of the U.S. wheat crop, in areas like Texas, Oklahoma and Washington state, is closer to export ports than Canadian wheat, which reduces average freight costs.
Sawatzky said two other factors should be kept in mind when comparing 1996-97 returns.
First, the U.S. marketing year starts June 1, while in Canada it starts Aug. 1. That means wheat sold by the U.S. from May to July, when prices were at the highest, will be reflected in the 1996-97 price projection.
For Canada, any wheat sold in that period will show up in the 1995-96 figures.
Secondly, the USDA’s 1996-97 projection is just that, a projection.
“You could certainly argue that price may be a little optimistic.”
