Alberta farmers will lose millions of dollars in crop insurance payouts
because projected wheat prices were based on out-of-date Canadian Wheat
Board data, says the head of Alberta’s general farm organization.
Neil Wagstaff, president of Wild Rose Agricultural Producers, said
hundreds of farmers will be out much-needed money because crop
insurance payout prices were calculated on the wheat board’s July 25
pool return outlook that didn’t take into account dramatically rising
wheat prices.
“It is our understanding that the Canadian Wheat Board Pool Return
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Outlooks were used primarily as the guide to determine projected wheat
prices for the variable price option,” Wagstaff said in a letter to
Alberta agriculture minister Shirley McClellan.
Alberta farmers have the option in the spring of buying additional crop
insurance called the variable price option. It provides extra coverage
if prices rise more than 10 percent by the end of July. About 30
percent of Alberta farmers took the extra price coverage this year.
Manitoba and Saskatchewan dropped the variable price option program for
2002 because it was too expensive.
On July 25, the wheat board released its pool return outlook with
relatively stable wheat prices.
On July 31, the cut-off day for the variable price option, the wheat
board released its initial prices with a note that they didn’t reflect
rising prices.
“The CWB will be requesting an adjustment payment for wheat, barley and
designated barley based on higher anticipated pool returns,” the news
release said.
On Aug. 9, the wheat board released an updated PRO because prices were
rising so dramatically.
It wasn’t only the wheat board that anticipated higher wheat prices,
said Wagstaff, who wants an accounting of how the crop insurance prices
are set.
Wheat prices at the Minneapolis Grain Exchange, the Chicago Board of
Trade and the Winnipeg Commodity Exchange already had risen sharply by
July.
Barley, oats, rye, triticale, flax, canola and other specialty crops
exceeded the 10 percent price difference needed to kick in the variable
price option, according to an Alberta Financial Services Corp. document
sent to farmers.
AFSC later revised its documentation to allow the variable price option
to kick in for Canada Prairie Spring wheat, but not for other kinds of
wheat.
Alberta farmer Robert Filkohazy of Hussar estimates he will lose
$30,000 in crop insurance because the price was based on a conservative
PRO.
Calvin Tracey, also of Hussar, said the out-of-date price projection
cost him $75,000.
“I believe the Canadian Wheat Board PRO on July 25 was erroneous.”
Wagstaff said AFSC refuses to tell farmers how their prices are decided.
“That’s the mystery. When they took a second look, how did they come up
with the increase.”
Phone calls to AFSC officials were not returned.
An earlier interview with Merle Jacobson, senior manager of crop
insurance for AFSC, said 30 percent of Alberta producers chose the
variable price option this year, increasing crop insurance liabilities
by about $73 million.
The impact would have been much larger had wheat prices started their
upward climb a few weeks earlier, he added.
“When they looked at price forecasts on July 31, looking at what
information was available at the time, there were really no strong
market signs,” Jacobson said.
“Most of the increase came after the middle of August when the U.S. and
Australia also announced they had production shortages.”
