DRAKE, Sask. – Canadian farmers should brace themselves for the return of U.S. grain export subsidies this spring or summer, says a senior official with the Canadian Wheat Board.
Brian White, the board’s director of market analysis, said last week it depends on how the 1997 wheat crop shapes up come May.
By then, the U.S. will have solid yield estimates for its hard red winter wheat crop and planting intentions for spring wheat. If it looks like there’s going to be lots of wheat around, the Export Enhancement Program could be dusted off and brought back into action.
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“As they look ahead, and as the European Union begins its export campaign for 1997-98, which usually starts in June, we could see the emergence of U.S. export subsidies,” he said in an interview , adding there’s no doubt the U.S. has the political will and financial muscle to bring back the EEP.
He said any EEP subsidies probably won’t be very large, perhaps in the range of $10 (U.S.) a tonne, about $13.70 a tonne in Canadian funds, but that’s small consolation.
“Even $10 a tonne, in certain markets like China, is $10 a tonne off the price we have to compete with,” said White.
The bigger the crop outlook, the more likely it is the U.S. will reintroduce subsidies.
If world wheat production is projected to be in the range of 580 million tonnes, the reappearance of the EEP becomes a “realistic possibility”, he told about 50 farmers gathered at the community centre here for a Grain Days meeting.
Last year’s crop is estimated to have been around 575 million tonnes. Production has averaged around 560 million tonnes in recent years.
White said even if production is up, there won’t be excess supplies of wheat around. The U.S. Department of Agriculture is projecting world stocks of 112 million tonnes in June 1997. That’s ahead of last year’s 104 million tonnes, but it’s not many years ago that stocks were as high as 175 million tonnes.
“That 112 million tonnes is still relatively low and so if we get a wheat crop more like 560 million tonnes, then there’s not really going to be any need to subsidize,” he said.
Some inside the wheat board say EEP subsidies could be introduced as early as April, others say it could be as late as July.
Subsidies considered
White said the prospect of EEP subsidies has already been factored into the board’s pool return outlook for 1996-97, which is projecting a price of $195 to $215 a tonne for No. 1 CW red spring wheat.
Winston Wilson, president of U.S. Wheat Associates, said in an interview he doesn’t expect to see any EEP subsidies before June 30, the end of this crop year.
“The price is fairly decent,” he said. “To me EEP is necessary and useful when you’ve got a lot of stocks you don’t particularly want to keep, but we’re not in that position.”
He also doesn’t think the budget-conscious U.S. government is anxious to reintroduce subsidies any time soon.
