SASKATOON (Staff) – Back in the spring, when David Rourke was looking at buying some land and machinery, everything looked rosy.
The wheat crop going into the ground was going to sell for $280 a tonne, according to the Canadian Wheat Board’s pool return outlook, and optimism abounded.
But Rourke was cautious. He bought a used combine, but backed away from the land market when booming prices got out of hand.
“I stopped buying land that was being offered to me because I thought it was too high, too much risk, and because wheat prices weren’t guaranteed to be there,” he said from his Minto, Man., farm.
Read Also
First annual Ag in Motion Junior Cattle Show kicks off with a bang
Ag in Motion 2025 had its first annual junior cattle show on July 15. The show hosted more than 20…
Truer words were never spoken, as Rourke and other farmers have watched May’s $280 PRO turn into October’s $213 PRO.
Farmers who shared Rourke’s caution and delayed major investments last spring are probably glad they did. Those who didn’t may be facing a major cash flow squeeze, say some agricultural finance experts.
“Guys bought land last spring based on the higher prices and a lot of new equipment went out on the basis of high wheat prices,” said John Beckton, a Saskatoon-based farm finance and marketing consultant. “That’s going to make a lot of guys pretty tight.”
Some may have to refinance and some may have to give back some of the things they bought, he said. But mainly, it will put on hold whatever plans farmers may have had for major capital purchases this winter.
The high price forecasts at seeding time also prompted many farmers to use more inputs than they normally would in an effort to maximize their yields.
“I think a lot of the chemical and fertilizer bills, there will be trouble to get them paid,” said Beckton.
However Dan Schmeiser, an economic analyst with Saskatchewan Wheat Pool, has a more optimistic view.
Farmers not hurt
“I don’t think many people are going to be hurt by this decline in prices,” he said. “Disappointed, yes. Hurt, no.”
Even though wheat prices won’t be as high as they looked a few months ago, the mid-range of the latest PRO still translates into a Saskatchewan farmgate price of nearly $4.50 a bushel for 1 CW and $4.16 for 3 CW wheat.
“The long and short of it is, farmers are covering their costs at $4 a bushel and still making a little bit of money,” said Schmeiser.
With returns at that level, the decision to seed more acres and put on more inputs will still pay off for most farmers, he said, while the prudence of capital investments depends mainly on the prices paid. Many of those purchases were made using Crow Benefit money and a series of CWB adjustments payments.
Beckton said the lesson to be learned from the plumetting outlook is to be cautious when making plans based on price forecasts.
“Commodity prices can teach you a lesson awful quick.”
