Ralph Goodale has sympathy, but no more money, for prairie grain farmers unhappy with initial payments.
The Canadian Wheat Board minister says everyone agrees the new payments are low but he rejected any suggestion that they indicate the board is doing a poor job.
“Obviously the initial payments are not a subject anybody can be particularly happy with, but they are unfortunately an accurate reflection of the world market price trends at the present time,” he said.
The 1997-98 initial payments are $130 a tonne for 1 CW red spring wheat and $95 a tonne for 1 CW feed barley, which translate into Saskatchewan farmgate prices of around $2.25 a bushel for wheat and $1 for barley.
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Those prices, down sharply from a year ago, have angered many farmers, with many wondering how they will pay their bills this fall.
“No one makes money at $2.20 a bushel,” said Saskatchewan Wheat pool economist Dan Schmeiser. “These prices are economically quite severe.”
Goodale said the the government will increase payments when market conditions allow, but wouldn’t speculate when that might be.
“Just as soon as the trends are solid enough that a positive recommendation can be made by the board with confidence, we would want to move the payments upwards,” he said, adding the government will not risk incurring a deficit in the wheat board’s pool accounts. “That creates a whole range of other problems, including international trade rules.”
The earliest that initial payments have been increased is October and analysts both inside and outside the board said that’s about as soon as farmers should expect any adjustment this year.
“If the market really took off you could look at earlier than October, but I think that is a reasonable time to be looking at it,” said Ward Wiesensel, the wheat board’s director of corporate policy. “But it really depends on the market circumstances.”
Analysts are generally optimistic about the prospects for an increase, saying the market outlook has improved substantially since the initial payments were calculated in early July.
Most expect the board won’t put forward new price recommendations until after harvest, once crop quantity and quality are known and the sales program is under way.
“I wouldn’t expect an increase any time soon,” said Schmeiser, adding the board and the government will want to wait for “solid evidence of a significant price increase.”
Could move quicker
However Fred Siemens, a barley trader with Palliser Commodities Corp., said he thinks the improvement in the market has been dramatic enough to allow the board to move more quickly.
“I wouldn’t think they’d have to wait that long,” he said. “These prices reflect heavy acreage and good yields, but now they say yields are average at best and deteriorating as the days go by.”
He also thinks the board may be anxious to boost the initial price on feed barley in order to attract delivery contracts and start putting together an export program.
For board critics like Jim Pallister, a Manitoba farmer and member of Canadian Farmers For Justice, the prospect of an adjustment payment isn’t good enough. He said the low initials will “wake up a lot of people” to the inadequacy of the wheat board marketing system.
In an open market system, farmers could hedge their wheat for close to $5 a bushel, he said. Instead they get $2.20 and have to hope for an increase several months down the road.
Goodale said while he expects the low initial prices could put new pressures on the board, he urged farmers to look at the pool return outlook, which is projecting a total return for the year of $162 to $192 for 1 CW wheat and $121 to $151 for 1 CW barley.
He said those kinds of numbers give him confidence in the board’s marketing system.
“On the basis of the evidence available to me, in what has become a very difficult market, the board’s performance ranks up there with the best in the world,” he said.
