Last year’s crop disaster has turned into this year’s financial crisis for the Ontario Wheat Producers’ Marketing Board.
The board is facing losses of up to $6 million as a result of unexpected costs incurred trying to sell fusarium damaged wheat in 1996.
Board officials are trying to convince the federal government to cover all or some of the deficit, but so far to no avail.
“Either Ottawa pays or our 14,000 producers pay,” said Jim Whitelaw, marketing manager for the Ontario board.
In the unlikely event the province’s wheat farmers refuse to go along with a program under which they would pay off the deficit, the consequences could be dire.
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federal government proposed several months ago to increase the compensation rate from 80 to 90 per cent and double the maximum payment from $3 million to $6 million
“The most extreme outcome is we declare bankruptcy,” said Whitelaw, while emphasizing that is a very remote possibility.
As last year began, the board expected to have about 1.3 million tonnes of soft white winter wheat to sell, with most of it falling into the top three grades. But fusarium cut yields to less than 700,000 tonnes, with about 400,000 tonnes falling into the feed grade.
The extent of the damage didn’t show up until harvest, forcing the board to buy back 200,000 tonnes of futures contracts which it couldn’t fulfill. That produced a loss of about $3 million.
High marketing costs
Meanwhile, when the board set its initial payment for the feed wheat pool, it estimated marketing costs to be $10 a tonne. But because of the unexpectedly large volumes of extremely poor quality wheat, marketing costs such as storage and handling soared to $16 a tonne. That produced another $3 million loss.
Such a situation would never arise for prairie farmers because returns from all grades of wheat are thrown into the same Canadian Wheat Board pool acount.
In the event there is no federal money forthcoming, the Ontario board has been discussing its options with farmers at a series of country meetings this winter. Those options include taking an estimated $10 a tonne out of the 1997 pool returns to pay off the deficit, or spreading it out over three or four years.
Both alternatives have their drawbacks. There are fears that taking it all out of the 1997 pool would discourage farmers from seeding spring wheat, making the financial burden even greater on those who do grow a crop. But if it’s spread out over the next few years, that means many farmers who didn’t benefit from the $6 million overpayment could be the ones paying it back.
