Prairie farmers produce more high quality wheat than customers will pay for, according to a new report by the Canadian Wheat Board.
In the next decade, farmers might find their bottom lines are better when they grow lower-protein, higher-yielding wheat.
The report might surprise some people, said Larry Sawatzky, the market analyst with the wheat board who wrote the report.
Sawatzky acknowledged the wheat board has traditionally emphasized quality.
“It is a pretty significant change just in terms of the attitudes that have been prevalent in the industry for several years,” said Sawatzky.
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Producing large amounts of high-quality wheat, defined in the study as Canada Western Red Spring No. 1 and 2 with at least 13 percent protein, has been Canada’s hallmark, getting farmers premiums, Sawatzky said.
Yet the optimal mix of wheat classes would see farmers grow at least 3.5 million acres less CWRS wheat than average. Sawatzky noted the shift has already started.
Last summer farmers grew 15.4 million acres of CWRS wheat, a dramatic drop from previous years, because of low world wheat prices.
But between 1992-93 to 1996-97, farmers grew an average of 4.4 million tonnes of high quality wheat, 38 percent more than the world demanded.
The wheat board sold the excess high quality wheat at the highest price possible, said Sawatzky, noting “the market was not willing to pay the full commercial price premium for it.
“It’s not the fault of the wheat board,” he said. “The tendency is always, the first knee-jerk reaction is always to blame the wheat board.”
Farmers decide what kind of wheat to grow based on price signals from the wheat board and agronomic considerations, he said.
“It’s always been our job to market what’s produced.”
Many farmers grow CWRS varieties to shoot for protein premiums, he said.
Others choose classes where higher yields make up for price discounts. For example, on average, CPS red varieties have a 44 percent yield advantage and 14 percent price discount.
In 1998, farmers grew 37 percent more acres of Canada Prairie Spring red varieties than they usually do.
“That tells you right there, for farmers in a suitable growing region, the yield advantage to CPS red has been more than enough to offset the price discount.”
At current prices, few farmers are excited about growing wheat, said market analyst Mike Jubinville.
But since most farmers need it in crop rotations, Jubinville said he sees them paying more attention to their wheat options.
“CWRS will always be king,” he said, but noted a move toward producing more medium quality wheats would be a move onto the turf of subsidy-wielding competitors like the United States and
Europe.
The president of the Western Canadian Wheat Growers Association called the report “a waste of
resources.”
Kevin Archibald said farmers watch market signals to decide what to grow; they don’t read reports.
“They respond to dollars and cents at the bottom line,” he said.
The PRO is only a snapshot of wheat values at a given time, said Archibald, and the system doesn’t let farmers lock in attractive prices.
The report was commissioned by the Manitoba Rural Adaptation Council, a group that distributes government funding to projects that help farmers adapt to life without the Crow transportation subsidy, lost in 1995.
Les Jacobson, an Arborg, Man., farmer and president of MRAC, said the organization wanted farmers to have the facts about market prospects for various classes of wheat so they can make good choices about what to grow.
“No else was really interested that we knew about that had the ability to … get a study like this,” he said.
MRAC paid the wheat board $10,000 for the study, but Jacobson noted the board gave “in kind” services. Major financial institutions paid to print and distribute the report.
