SASKATOON — All the talk about higher wheat prices is about to become a reality for prairie farmers like Gerald Leduc.
For the last couple of months, grain merchants and market analysts have been bullish on wheat, pointing to lower stockpiles, strong demand and reduced export subsidies.
The federal government responded last week by boosting initial payments $25 a tonne for red spring wheat, durum and malting barley and $15 a tonne for feed barley.
Leduc, who grows cereal crops near Assiniboia, Sask., said the price hike will add to the increasingly upbeat mood in the countryside.
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“I’m sure people will be more optimistic when they see the new prices,” he said.
But, he added, the higher price won’t mean much if elevators remain congested, as they currently are in his area.
“It’s one thing to have the initial price increase, but it’s another thing to haul the grain so you can get the cash,” he said. “That’s going to take a little longer.”
News of the price hike was also welcomed by John Clair, a Radisson, Sask., farmer and member of the Canadian Wheat Board’s advisory committee.
“I’ve been anxiously anticipating and guessing what was going to happen,” he said, since the wheat board announced Sept. 29 it was recommending an increase. “I’m sure pleased to see it.”
The new initial payment for 1 CW red spring wheat is $135 a tonne or $3.67 a bushel, effective Oct. 24. After freight and handling charges are deducted, that translates into an average take-home cheque of about $110 a tonne or $2.99 a bushel.
Highest since ’91
Initial wheat payments haven’t been this high, this early in the crop year since 1990-91.
That year, the payment was set at $135 when the crop year began. As it turned out, world prices collapsed and the wheat board ended the year with a deficit in its wheat pool account.
That won’t happen this time around, given the bright outlook for world wheat markets. Even with this increase, there’s still a wide spread between initial payments and the wheat board’s projected total payment for the 1994-95 marketing year.
For 1 CW red spring wheat, the pool return outlook is $45 a tonne ($1.22 a bushel) above the new initial payment, at $180 a tonne, or $4.90 a bushel.
Amber durum highest spread
The outlook for 1 CW amber durum is more than $60 higher than the new initial payment of $150 a tonne, while the spread is around $20 a tonne for feed barley and around $35 a tonne for designated barley.
Leduc said he hopes the government also makes an interim payment on the expected final payments for 1993-94.
The board’s most recent estimate of final returns for 1993-94 grain sales indicates final payments will be in the range of $20 to $30 a tonne for wheat, $33 to $43 a tonne for durum and $20 for feed and malting barley.
A wheat board official said last week the board is aware of those spreads, but is not yet in a position to recommend an interim payment.
“Our financial people are still tabulating the numbers” to see if the prices in the September EPR are still firm, said information officer Deborah Harri. “If they are, then we’ll be in a position to make a recommendation to the federal government.”
The wheat, durum and feed barley accounts were closed Sept. 30. Malting barley will be closed Oct. 31.
