SASKATOON – It may be a little early to break out the champagne, but Lorne Hehn thinks 1994-95 could be a happy new year for grain farmers.
“If we can get a crop of reasonable quality, I think we can be quite optimistic,” the chief commissioner of the Canadian Wheat Board said last week. “We’ll find a home for it at some fairly reasonable prices.”
A number of factors have combined to build optimism for the crop year starting Aug. 1:
- World wheat production will be down by about 12 million tonnes this year, while trade is projected to rise by five million tonnes.
- As a result, stocks of wheat will be drawn down by 10 million tonnes to 120 million tonnes by July 1995, their lowest level in five years.
- Supplies of high-protein bread wheat will be extremely tight in the coming year, barring a large, high-quality crop in the U.S.
- The U.S. Export Enhancement Program has been cut back for the year starting Oct. 1, both in total tonnage and budgeted spending.
- The wheat board has heavy sales booked out of the West Coast for August, September and October and it looks like there will be enough transportation to move it.
Read Also
Land crash warning rejected
A technical analyst believes that Saskatchewan land values could be due for a correction, but land owners and FCC say supply/demand fundamentals drive land prices – not mathematical models
Yet in the grain industry nothing is ever certain, and there are still potential clouds on the horizon.
Despite cuts in EEP funding, the world wheat market will continue to be heavily distorted by U.S. and European export subsidies. And there’s no guarantee Canada will produce a quality crop, said Hehn.
Also, labor disputes could disrupt grain movement this fall, as the two national railways and Saskatchewan Wheat Pool are locked in negotiations with their employees.
Hehn said good harvest weather and a good-quality crop are the most crucial factors.
It’s probably not going to be particularly high in protein, given weather conditions to date, but nor should it be as low as last year’s 12.4 percent average, the lowest in 37 years.
“If we can get the protein even half a percent higher than last year, that will certainly be helpful,” he said. The 10-year average is 13.8 percent.
World wheat buyers are starved for protein, he added, and that should be reflected in both demand and prices: “Once you’ve gone through a year of a (protein) shortage like this, every mill and every customer is going to be looking at sticking just a little bit away and that tends to have a very positive impact in the marketplace.”
A total of 24.6 million tonnes of wheat will be eligible for EEP subsidies, down from 32 million, while the budget has been capped at $850 million (U.S.), down from $1 billion. Markets like Mexico, Brazil and Indonesia are not on the initial EEP list.
“This could ultimately turn out to be the break Canadian farmers have been waiting for.”
