Good morning, class. Welcome to the elite School of Voodoo Statistics. Our first exercise today is how to make a wheat board, or similar agency, look bad.
Let’s say the board managed to pay $5.26 a bushel for high-protein wheat last year. All we need to do is compare that with prices farmers might have received in North Dakota for high-protein wheat.
First, we select one good price for each month from some North Dakota elevator. Then we average them for the year.
This won’t be a real average, of course, since there’s no relationship to the number of bushels that were sold at each price. (If you sell 100 bushels at $3 and five at $9, the average price per bushel is not $6.) But no one worries about that. It’s also true that North Dakota prices would probably have dropped if more Canadian wheat poured in, but no one can prove that.
Read Also
Late season rainfall creates concern about Prairie crop quality
Praying for rain is being replaced with the hope that rain can stop for harvest. Rainfall in July and early August has been much greater than normal.
So what result do we get? Compared to the board’s $5.26, the U.S. paid $5.19, measured in Canadian dollars. Oops, that will never do.
Let’s see, instead of taking U.S. prices actually paid to farmers, we could take their posted prices that they use to attract business.
That would be about 35 cents a bushel more, bringing the U.S. price up to $5.54. Some farmers might even get the posted price, without any discounts for protein, bushel weight, etc. Of course, the lucky farmer who actually gets the posted price may lose double the dockage he would in Canada.
But let’s not complicate things – we now have the U.S. comparison price higher, $5.54 to the board’s $5.26.
Considering the extra transportation costs for a farmer wanting to truck grain to the States, that’s not a significant difference. What else can we do?
Instead of taking the board’s price for high protein, let’s use their price for 13.5 percent protein. That gets them down to $4.82, which is significantly less than $5.54.
But this isn’t impressive enough, given the extra trouble and cost of bypassing the board. What we need to do is take the price for standard red spring wheat, below 13.5 percent.
That gives us a price of $4.30 a bushel in Canada – and success! Now we can come to the highly quotable conclusion that farmers lose “more than a dollar a bushel” by not delivering to North Dakota elevators.
This exercise, of course, does not happen in real life, where things are backwards – people just start with the $4.30 and the $5.54, and sometime later, if at all, may analyze the components, some of which are estimates.
Your homework assignment, class, is to prove statistically that Quebec will prosper outside Canada. Good luck.
