The Canadian Wheat Board will cherry-pick wheat markets this year to
try to get the best price for a bad crop.
The board will be selling a Canadian prairie spring wheat crop smaller
than the disastrous 1988 crop, board officials said at an
end-of-crop-year news conference last week.
There won’t be enough wheat for every customer, and feed and malting
barley buyers might find the board has almost nothing to sell. Only
durum buyers will find adequate supplies in Western Canada.
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“We will be looking at markets that provide the highest return,” said
CWB president Greg Arason on Aug. 7.
“Discretionary sales will be very limited. We will have some customers
who will be disappointed. We’ve put a lot of effort into building
loyalty and commitment to Canadian grain and we have a lot of loyal
customers around the world and the situation this year is that we’re
going to have to do some picking and choosing, and we’ll have to turn
some business away.”
The board’s production estimates surprised the futures markets in
Chicago, Kansas and Minneapolis, forcing wheat prices higher.
The board expects prairie farmers to harvest only 12.24 million tonnes
of spring wheat.
That’s less than the drought-reduced 1988 total of 12.41 million tonnes
and the smallest spring wheat crop since 1974.
This year’s expected barley production of 7.2 million tonnes is far
below 1988’s 9.2 million tonnes and the smallest crop since 1968.
Durum production is expected to jump by more than one third from last
year, to 4.1 million tonnes, more than double the amount grown in 1988
and near the five year average of 4.68 million tonnes. Last year,
prairie farmers grew 3.05 million tonnes of durum.
The drought that ravaged parts of Saskatchewan and Alberta did less
damage in the southern durum belt, parts of which have enjoyed ideal
growing conditions.
Arason described the spring wheat outlook as “bullish” as crops in the
United States, Australia and Argentina suffer from drought. Combined
with Canada’s small crop, these countries’ problems are creating supply
worries on the world market.
“When you mention those four nations on the same line together with
crop concerns, you know that the international market for wheat and
barley must react,” said Arason.
But smaller, non-traditional exporters such as some former Soviet
republics are likely to meet some world demand, and the European Union
crop appears to be large, he said.
Drought-affected crops usually produce high protein levels, which
generally brings a higher price, but Arason said premiums could be
smaller this year if the droughts in other countries produce lots of
high protein wheat.
While wheat customers will have to bid high prices, malt and feed
barley customers may have almost nothing to bid for.
“Obviously we don’t expect to export much malting barley, if any,” said
Arason.
“Malting barley will be a challenge for the maltsters and for us to
source.”
While Arason laid out a positive price forecast, he highlighted the
dire circumstances many farmers face.
“This is a very real tragedy,” said Arason.
“It’s going to have very real long term impacts for some people who
will have to take drastic measures. And it will have a ripple effect
through the industry.”
