Initial prices for Canadian Wheat Board grains are so low they have left producers wondering how to pay the bills.
But there may be increases in the offing, providing the government agrees.
In some cases, such as feed barley in Manitoba, the difference between the initial payment and the handling and transportation charges leaves almost no money in producers’ pockets.
Stewart Wells of the National Farmers’ Union said the federal government is being too conservative in setting the initial price.
“It appears that Reg Alcock (minister for the Canadian Wheat Board) and his colleagues have become a little too risk adverse and set the initial payment at one of the lowest levels ever,” he said.
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“And in a year when producers need the money more than ever.”
Initial payments on CWB grains have historically represented about 75 percent of the board’s pool return outlook.
This year it appears to be about 65 percent and less than that in some cases. When shipping is taken out of the cheque, often between $50 and $60 per tonne, the farmer received less than half of the initial payment.
“We consult with the wheat board and look at all the factors in the international markets,” said Craig Fulton, an Agriculture Canada commodity analyst.
“The government decides how much risk they want to take on with the initial payments and that is how it is set.”
CWB spokesperson Maureen
Fitzhenry feels the initial prices are set too low, based on the international markets.
“We told them that, but the government didn’t want risk levels set any higher,” she said.
The NFU and the Western Canadian Wheat Growers Association have approached the government asking that initial prices be increased.
Fulton said it is common to see initial prices increase as the board confirms sales or when international prices rise.
“Those factors reduce the risk of backing the initial price allowing the increase … last year’s was the latest increase in initial payments we’ve had,” said Fulton.
The CWB said it had just asked the government for higher prices. Those requested increases would raise wheat initials in a range from $7 to $30.40 per tonne; amber durum up $7-$23.50; select barley up $22-$24 and feed barley up $33.
Those increases would lift No. 1 CWRS 12.5 percent protein wheat to $149 per tonne from $127. Feed barley would rise to $105 per tonne, while two-row select would jump to $141.
Fulton said 2005-06 is one of the softest cereal markets in years.
“There is more low quality wheat in the market this year. Russia and the Ukraine are exporting it. We’ve had bad weather in Canada. Internationally we have a large carryover.”
Wells said the low initial prices have also created lower than necessary cash prices in the feed market.
“This also causes farmers to turn against the board, thinking these initials are their fault,” he said.
The NFU president fears that the low initial prices are the tip of the world trade negotiation iceberg now floating in Geneva.
“A low initial payment. A compromise on the government’s underwriting of the interest on the CWB borrowings. We understand that the (federal government) is under a lot of pressure from the United States over the board’s monopoly powers in the Geneva meetings this week,” said Wells.
