The shock of $2.20 wheat and $1 a bushel barley could trigger some major changes in the way prairie farmers do business, say farmers and grain industry observers.
“I think it will have a fairly profound effect,” said Earl Geddes, a long-time Manitoba farm organization official now involved in market development work for the Canadian Wheat Board.
Geddes and others expect grain farmers will be prompted to look even harder at other ways to make money, whether it’s diversifying into new crops, raising livestock or investing in value-added businesses at the local level.
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That has already started to happen over the past few years, as farmers watched freight rates take a bigger bite of their grain cheques following the demise of the Crow Benefit in 1995.
But analysts say the effect of the higher freight rate was masked to a large extent by relatively high grain prices and transition payments from the federal government.
With initial payments of $130 a tonne for wheat and $95 a tonne for feed barley, that mask has been ripped away, especially for farmers in the high freight areas of Manitoba and eastern Saskatchewan.
“I think everybody was quite aware of the impact of high freight rates, but when the money is flowing and you’re getting additional funds from the government, the reality just doesn’t set in,” said Shannon Bunkowsky, policy analyst for Manitoba Agriculture.
It’s one thing to hear economists and farm management advisors deliver speeches about what might happen, she said, it’s quite another to deliver wheat to the elevator and take home $2.20 a bushel.
“If farmers didn’t realize it before, they certainly will this year,” said Bunkowsky.
Kevin Wadham, who raises cattle and grows grain on his farm near Virden, Man., thinks most younger farmers in Manitoba have been well aware of the increased transportation costs and already started making the adjustments.
As for those who haven’t, “this will definitely wake them up,” he said. “If they don’t listen to this, there’s going to be a lot of land available next year.”
At his local elevator, the take-home pay for a bushel of No. 1 CWRS wheat is $2.25 , and no one can make a living at those price levels, said Wadham.
He said a lot of farmers in his area have been getting into hog production, while cattle numbers have bucked the national trend and remained stable in Manitoba. Farmers who want to grow wheat will probably focus on the CWES variety Glenlea, which carries a lower freight rate than other wheats because it’s mainly shipped to the U.S.
Geddes said those farmers who used their Crow transition payments to diversify their farm, whether through livestock or new crops, will probably fare better this year than those who used it to buy a new combine or expand their grain operations.
He also thinks the low returns on wheat and barley could prompt farmers and others in rural communities to follow the lead of their counterparts across the border in North Dakota, who have begun setting up a variety of co-operative ventures, ranging from bison marketing to pasta manufacturing to carrot production.
“People will be looking for options they can do with their property in collective terms that provides them another marketplace other than the export market,” said Geddes.
Richard Gray, an agricultural economist at the University of Saskatchewan, said while some farmers may want to get out of cereal grains production with these kinds of net returns, for many it’s easier said than done.
It takes a fair amount of capital to get into livestock production, he said, while many farmers are limited in what crops they can grow by geography and agronomic considerations.
Special crops may pick up
Hal Cushon, director of policy for Saskatchewan Agriculture, said he thinks the low returns on wheat and barley will spark more interest in special crops, which achieved record acreage levels in 1997, and community-based pork production.
“There’s no doubt farmers are looking for alternatives,” he said
But at the same time, farmers aren’t about to stop growing wheat: “The world still needs lots of food and feed grains and there will be a market,” said Cushon.
Manitoba Pulse Growers Association executive director Ken Tjaden said pulse production in that province is driven less by price and more by rotations and agronomic considerations. He doesn’t expect acreage to change much as a result of low returns on cereal grains, adding prices on peas and beans aren’t all that great either.
“The producers here are into a rotation and if beans or peas are part of the rotation they’ll stick with it,” he said.
Geddes said the wheat board has some concerns about losing wheat and barley production in Manitoba, but is confident farmers will still grow some cereals for export markets.
“We have good markets for high value grain and if we don’t get it produced it’s hard to service those markets,” he said.
