AT first glance, Allan Luke’s grain farm near Ste. Rose-du-Lac, Man., has a lot going for it during the grain price collapse of 1998.
He had good yield on his 1,350 acres, he has off-farm income, his wife Kristine teaches and he has been able to stow some money in his Net Income Stabilization Account during the past three years.
Yet this autumn when Luke pored over his farm books before returning to his winter job repairing computers in Dauphin, about 50 kilometres away, the conclusions were less than optimistic.
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“Five years down the road, I don’t know if I’m going to be on the farm any more,” he said.
“If it’s not going to give me a reasonable return over the next five years, there’s other options.”
He will plant a crop next spring, thanks in part to off-farm income. But he does not know if returns will be enough during the next few years to keep him on the land.
With Canadian Wheat Board chief commissioner Lorne Hehn predicting a “blood bath” in grain markets during the next two years, it does not seem like a sure thing.
For some analysts, cereal prices already are remarkably weak.
In the 13 years he has watched
cereal markets for the CWB, Brian White rarely has seen world barley prices this low.
Feed barley export prices are so depressed that the wheat board expects farmers will sell most of the crop at home, and little to the export pool.
The mid-point of the board’s November pool return outlook, its best estimate of prices for the coming crop year was $140 per tonne. That compares to a return from the revenue sharing pool of $205.50 per tonne in 1995-96.
“God, it’s hard to believe we ever had prices this high,” said White.
Yet there is another way to view current low prices. Things could be worse, and have been.
At $126 per tonne, prices at port compare favorably with prices seen there in the past 10 years. They are much higher than the $90 per tonne of 1990-91, when the feed barley pool ran a deficit, or the $74 per tonne of 1987-88.
“The big, big difference that farmers would see now is the transportation costs,” noted White. The end of the Crow Benefit subsidy for shipping grain to port has taken half a billion dollars from the net value of prairie crops.
Dramatic increases in transport and input costs mean that farmers’ take-home income is lower than it has been in the past, even when prices were lower.
Wheat futures prices made the news when they hit 21-year lows in September at the Chicago Board of Trade. But expected wheat returns in Canada aren’t as low as in 1990-91 or during the export subsidy war year of 1986-87.
Agriculture Canada analyst Glenn Lennox said the low Canadian dollar is keeping prices higher than they otherwise would be.
“The exchange rate is kind of masking the real decline in prices for the Canadian farmer.”
In the three prairie provinces, average gross returns per acre of wheat will be higher this year than they were in 1991-92 or 1986-87, albeit without the same farm programs that were available in those years, and without the Crow benefit transportation subsidy.
In Manitoba, after operating costs, average returns for wheat are $24.60 per acre this year. That’s more than 1997-98, when they were $16.75, and about three times what they were in 1991-92, not allowing for inflation.
But an average of $24.60 would be only $24,600 for a 1,000-acre farm. And the figures are averages before inflation, depreciation, machinery investment and servicing of farm debt are factored in. Those deductions can be substantial.
Oats are expected to net $34.50 after operating costs, down more than $10 per acre from last year. Oats lost $9 per acre in 1991-92.
Barley returns in the province also are expected to be about four times what they were in 1991-92.
Carol Gunvaldsen, crops analyst for Manitoba Agriculture, noted good yields and quality from the 1998 crop are boosting returns.
Jason Kotowich, a production economist with the Alberta government, said it is difficult to talk about average returns for a crop. Yields, variable costs and fixed costs vary greatly between regions and farms, depending on weather and agronomic practices. But in general, he said, cereal returns are lower because prices are down.
The department expects cereal prices to rise somewhat for 1999-2000. It’s hard to know what direction returns will take because it’s too early to predict yields, he said.
Gunvaldsen agreed.
“At this point in time, it doesn’t look like a drastic improvement,” she said. “And that is a very disappointing scenario.”
Manitoba farmer Alan Luke has a more immediate assessment.
“It seems like the nature of farming,” he said. “You get a couple of good years and then you get five stinkers and this one definitely looks like a stinker.”
