WINNIPEG – Larry Sawatzky hopes he’s wrong.
The Canadian Wheat Board’s market analyst delivered some sobering news about 1998-89 grain prices to the annual Grain World market conference this week.
Wheat prices are forecast to be down next crop year by $5 to $6 a tonne from the final returns that are being predicted for the current crop year, while feed barley is down $11 and designated barley down by anywhere from $12 to $18 a tonne.
But all that looks like good news compared with the outlook for durum wheat.
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The board is projecting a drop of $73 a tonne for No. 1 CWAD, with next year’s net return projected to be $198 a tonne (basis export position).
The premium for No. 1 CW durum over No. 1 CW red spring wheat will plummet to around $20 a tonne from more than $80 this year.
“I kind of felt like the grim reaper up there, the bearer of bad news,” Sawatzky said in an interview after his presentation.
For prairie grain farmers, the forecast was probably not unexpected, but still bad news, said Art Macklin, an Alberta farmer and chair of the CWB producer advisory committee.
“I’m not going to project doom and gloom, but I know it’s really going to put the squeeze on farmers,” he said, especially since less government support is available to producers in Canada than to producers in the United States and Europe.
But he called prairie producers “resilient” people who somehow seem to adapt and survive.
Throughout his remarks, Sawatzky repeatedly cautioned grain industry officials and farmers that the forecasts for final returns are extremely early since the crop hasn’t yet been planted.
“Don’t lose heart too much,” he said. “We’ve been wrong before.”
For durum, the new PRO is an example of the old adage that the cure for high prices is high prices. Farmers will plant more durum and world production is expected to increase by 16 percent to 30.4 million tonnes.
The board expects durum acreage to increase by 16 percent in Canada and 15 percent in the U.S., while production is expected to rebound in North Africa, which experienced a severe drought last year.
The high prices have also brought new exporters into the durum market, countries like Turkey, Syria, Australia and Mexico.
Sawatzky said he doesn’t expect the bad news about durum will change planting intentions, partly because many durum producers have few options, and partly because they’ve seen PROs change before.
“I think farmers that were going to seed durum are going to go ahead and do it regardless, because they know things can change,” he said.
Price breakdown
Here’s what the board said about the 1998-99 price outlook for other crops:
- Wheat – Prices will be down by $5 to $6 a tonne, with No. 1 CWRS forecast to come in at $178 a tonne. Last year’s record crop will result in increased carryover stocks, while trade will remain flat. The U.S. and European winter wheat crops are in good condition.
- Feed barley – Limited demand has led to a build-up of stocks, especially in Australia and the EU. European export policies will also be a key factor in next year’s prices, along with purchases by Saudi Arabia, which have lagged in 1997-98.
- Designated barley – Increased EU supplies, slow demand from China and aggressive EU export subsidies are depressing both malt and malting barley prices. Crop quantity and quality in Canada, the EU and Australia will be key factors in the coming year. Strong demand for six-row in the U.S. will narrow the spread with two-row.
