The Conservative government lived up to its name when setting initial payments for the 2006-07 crop year.
But with wheat and durum prices strong, there is room for the conservatively positioned initials to rise.
Initial payments announced July 31 were a mixed bag, with wheat, feed barley and designated six-row barley higher than at the same point last year, but durum and designated two-row barley down.
Just a few days before, the Canadian Wheat Board’s July Pool Return Outlook generated optimism that the board was starting to capture the bull market earlier seen in the American wheat futures.
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But David Przednowek, the board marketing manager, said the process that led to setting the initials was based on the June PRO, which did not yet reflect the strength in wheat markets.
“So there is a time lag relative to where the recommendations are made versus when they are released, so you can’t pick up any adjustments that you might see in the July PRO,” he said.
Przednowek also said that when the board made its recommendation to the federal government, it advocated setting initials at 75 percent of the June PRO.
“They were not in agreement in terms of the risk level we proposed,” he said.
The initial payment for No. 1 red spring wheat 12.5 percent protein is 69 percent of the June PRO and for No. 1 durum 12.5 percent protein it is about 62 percent. The percentages are even lower when compared to the stronger July PRO.
That said, Przednowek is bullish about the future.
“Things have changed fundamentally from the June PRO to the July PRO for both wheat and durum, and designated barley for that matter.”
New crop supply problems have developed in Canada, the United States, Australia and several other key wheat producing countries.
The dryness in North America has reduced the durum production outlook while demand prospects in some regions of the world have improved.
“In the U.S., (durum) market prices have really jumped over the past month,” he said, adding that American farmers are holding tight to their stocks, expecting that durum’s traditional price premium to spring wheat will be restored.
