MOOSE JAW, Sask. – Good news is the one thing Tim Coulter didn’t expect to hear when he went to a hard red spring wheat meeting.
But after a Canadian Wheat Board analyst’s presentation, the farmer from Briercrest, Sask., was ready to consider keeping some wheat in his rotation this year.
“It’s great if we can look at a slight price improvement,” said Coulter, who intended to plant no wheat at all this spring.
Board analyst David Boyes told wheat growers at a CWB meeting in Moose Jaw, that the dismal price situation could change.
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“Things are set up to improve,” said Boyes, who cautioned prices will not necessarily improve soon.
However, he said a number of long-term price improvement conditions are appearing.
The price collapse was created by a string of record crops, which pushed up world wheat stocks.
In 1998 the stocks-to-use ratio, which reveals how much surplus there is in world wheat stocks, rose to about 24 percent and sent prices plummeting. Stocks-to-use is now about 22 percent, and in the next two years could fall below 21 percent.
That may not sound like a huge change, but it could be important. During 1995-96, when wheat prices were high, stocks-to-use stood at 19.7 percent.
“There’s a very, very strong inverse relationship,” said Boyes.
“When stock levels are low, prices go up.”
Boyes said world wheat stocks will have dropped six million tonnes to 130 million by the end of this crop year.
Stocks in the major exporting nations have also dropped to 50 million from 53 million tonnes.
The six million tonne drop in world stocks is expected to be repeated in 2000-2001, said Boyes, though it is still too early to say because farmers have yet to produce that crop.
Boyes said world grain trade has been depressed since the fall of the Soviet Union and the weakening of Chinese demand for imports.
World trade dropped from 116 million tonnes in 1989 to 100 million tonnes in the mid-1990s.
Now, Boyes said, trade is back up to 104 million tonnes.
All in all, world wheat stocks are heading in the right direction to begin to push prices higher, said Boyes.
His analysis is based on the United States producing an average crop this year.
Some analysts think dryness in the U.S. winter wheat region could produce a small crop, which could push prices higher, but Boyes has not factored that into his calculations because “it’s a little bit too early to get too excited. Let’s hold our breath for the next couple of months and see what happens.”
