Wheat prices will continue downward over the next decade because of minor exporters like those in the former Soviet Union, and will fall faster than corn and soybean prices.
That will leave western Canadian grain farmers married to a weaker crop than what most American farmers rely upon, according to a long-term Canadian Wheat Board forecast.
But prairie farmers will see their prices hold firmer than those for most wheat farmers in the world because they produce top quality wheat, a sector of the market where competition might be less fierce.
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“As trade increases in high quality wheat, we’re going to increase the amount of it we sell,” said board market analyst Peter Watts.
“A greater percentage of our exports will be high quality wheat.”
The board’s market analysis section examined world production, trade and prices between 1997and 2002, then projected where it thought grain market trends would go between 2006 and 2012.
The board predicts that demand for corn and soybeans will grow “fairly robustly,” compared to a more slow-growing demand for wheat. Wheat prices will also suffer because the non-traditional exporters who ruined wheat prices this winter – Russia and Ukraine – can grow wheat better than other crops and will concentrate on it.
“Wheat is what they grow best,” said Watts.
The board expects Canadian wheat and durum exports to stagnate at late-1990s levels, at about 17 million tonnes, and not return to the early 1990s record of more than 25 million tonnes.
“It’s a reversal of the trend,” said Watts.
World wheat trade will increase by about 15 percent by 2012, and about 13 percent of the total will continue to be high quality wheat. Watts said No. 1 Canada Western Red Spring wheat with 13.5 percent protein is an example of high quality wheat.
That means there will be about 15 percent more demand for high quality wheat. The board expects Canada to retain its 50 percent share of that market segment so Canadian farmers will be selling more of that and less of the low quality. Watts said that will allow prairie farmers to avoid the ugliest part of the market, in which low quality, bulk grain from countries like Ukraine and Russia fight for sales at cutthroat prices.
Farmers will see overall grain prices continue to decline in buying power as they have been doing for decades, as the cost of production for grains drops when farmers adopt new technologies and improved crop varieties, wheat board analyst Bruce Burnett said.
The biggest growth in world production will occur in the non-traditional exporting countries, where there is the greatest potential for large-scale improvement.
