WINNIPEG – The agreement to cap Western Canadian wheat exports to the United States is better than no deal at all, the chief commissioner of the Canadian Wheat Board says.
“I think one has to look at the alternatives,” Lorne Hehn said. “The alternative was no deal or a worse deal. Our main concern was market access.”
The cap on non-durum wheat exports of 1.05 million tonnes gives the board plenty of room to manoeuvre in its bid to market an ever increasing range of milling wheats into the U.S, he said.
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If crop quality is good, the board plans to further promote the Canada Western Extra Strong class of wheat, popular in frozen doughs and pan breads. Officials also want to introduce the Canada Prairie Spring class to U.S. customers this year.
“I think it gives a chance to be very aggressive in terms of servicing our traditional customers down there and also seeking out customers,” Hehn said. “It is considerably above the three-year average if we discount last year’s sales.”
Odd measuring stick
Hehn said holding the deal against last year’s record movement of about 2.5 million tonnes into the U.S. market “tends to be a bit unfair as a measuring stick.”
As much as 1.3 million tonnes of Western Canadian wheat sales into the U.S. were of feed wheat. Canada had an unusually large crop of feed wheat to market last year, which coincided with a corn crop failure in the U.S.
When averaged, the board’s U.S. sales of predominantly milling wheat between 1989 and 1992/93 were just over 456,000 tonnes for non-durum wheat and slightly more than 400,000 tonnes for durum.
Ron Gibson, manager of pricing for the board, said the agreement means the board will sell a minimum of 300,000 tonnes of durum into the U.S. market this year.
Market dynamics a factor
But whether it will pay the $23 per tonne tariff on sales volumes between 300,000 and $450,000 will depend on market dynamics such as transportation costs and how the U.S. manages its Export Enhancement Program.
“If EEP bonuses were small, then maybe we wouldn’t do anything. If EEP bonuses are blown out to $50 a tonne, we may do that whole 150,000,” Gibson said.
While the lid on durum exports may appear restrictive, Hehn said it may actually be a boon to the board’s overall durum price pool. World stocks of durum remain tight, despite increased production in Canada, the U.S. and the European Union.
“The U.S. is going to be forced now to supply their domestic market. They are going to have to exercise much more discipline in the export market.”
Canada exports two to three million tonnes of durum annually. “The export market is still our big volume market and if we keep the export enhancement program discount at low or zero levels that’s going to be a very positive thing to final returns.”
Hehn said board officials were surprised last week to see the USDA announcement of a $6.59 U.S. EEP bonus on durum sold to Algeria, but they were encouraged by the fact the subsidy was so low.
