Wheat and barley price forecasts continue to march steadily downward with little hope for a better outlook.
In its latest pool return outlook, the Canadian Wheat Board moved all prices lower. The lower price outlook included the slight strengthening of the Canadian dollar.
Particularly hard hit were lower-quality classes of wheat, which dropped $10 to $15 per tonne from last month. Feed wheat forecasts fell by $20 per tonne during September.
Since February, when the wheat board made its first price outlook for the 1998 crop, lower-quality classes of wheat have dropped $16 to $25 per tonne.
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From Aug. 1 to Sept. 18, about 650 farmers phoned the wheat board to ask when prices will rise.
Even though Canadian farmers cut their wheat sowings by 30 percent because of expected low prices, the situation has worsened, said chief commissioner Lorne Hehn.
That’s partly because around the globe, farmers have planted the second-largest wheat crop ever, on the heels of last year’s record crop. In the European Union alone, farmers expect to harvest more than 103 million tonnes, compared to the five-year average of 89.5 million tonnes.
Subsidies in Europe and the United States have encouraged farmers to grow wheat despite low prices, ample stocks and poor demand, said Derek Sliworsky, marketing manager in the wheat board’s sales department.
European Union subsidies are equivalent to $55 per tonne on wheat and $135 per tonne on malting barley.
Sliworsky said Europeans can sell feed wheat to a traditional Canadian customer like South Korea for $80 per tonne, including transportation.
In the United States, changes to the loan deficiency payment program are causing ripples around the world. Farmers there are getting 27 cents (U.S.) per bushel above the going price for wheat.
“It leaves the U.S. farmer isolated from what the market really is,” Sliworsky said.
Before 1996, American farmers had to hold back this grain from the market.
Now, they can sell it right away. This pushes low world prices even lower, said Sliworsky.
At the same time, importers are being cagey about how much they will buy this year.
Sliworsky said Asian countries are holding off because they don’t know what their economy and currency will be like later in the year.
Other buyers are waiting for prices to drop to try to get the best deals, particularly in the durum market where there are ample supplies of good quality grain.
On the bright side, Sliworsky said:
- U.S. farmers might plant fewer acres of hard red winter wheat this year because of dry conditions.
- The European Union will increase the number of acres of grain it keeps out of production next year.
- Argentine farmers planted less wheat because of low prices.
- The region of Australia where high-quality wheat is grown has been hit hard with rain.
To capture better prices the wheat board will leave more sales until after Christmas, when it hopes markets will improve.
Adrian Measner, executive director of marketing, said the board will export 45 percent of its wheat and barley by the end of December, and another 40 percent by the end of May.
Board sales in September were at prices more than 35 percent lower than prices this time last year for prairie spring white, soft white spring, No. 2 durum, feed barley and malting barley.
Meanwhile, recent sales of No. 2 red spring wheat with 13.5 percent protein were at prices up to 15 percent lower than last year, Measner wrote in a report to farmers.
The wheat board sold most of the 1997 crop before June 1998, so plummeting prices since then won’t have much effect on the prices farmers receive for last year’s crop.
Last week, the board said it will ask the federal government to send out interim payments for the 1997 crop.
