An agricultural economist says the new United States farm bill may have the opposite impact on Canada’s pulse industry than people were expecting.
Prairie farmers were nervous that inclusion of pulses in the American subsidy program would cause pulse acreage to soar south of the border, driving down market prices for peas, lentils and small chickpeas – the three crops included in the new legislation.
University of Saskatchewan professor Hartley Furtan expects the U.S. farm bill may indeed lead to rising pulse acres but he thinks it will happen in Canada instead of the U.S.
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That’s because at current contract prices, the subsidy program favours more traditional crops like wheat and corn over pulses, so he expects American growers will be more apt to seed cereals and feed crops in lieu of peas, lentils and chickpeas.
“What you see is very high target prices for wheat and corn. So you’re likely to find a lot of distortionary effect there,” said Furtan, one of the featured speakers at Pulse Days 2003.
The floor price that American farmers will receive for pulses works out to $9.81 per hundredweight for peas, $18.51 per cwt. for lentils and $11.72 per cwt. for small chickpeas.
But due to poor world pulse production, farmers can get better new crop contracts for those crops, so the farm bill won’t have much of an effect on U.S. pulse acres, at least for 2003.
The opposite is true for cereal grains, said Furtan. The Dec. 31, 2002 futures price for new crop wheat, for example, was $3.01 per bushel. The target price for 2002 wheat established in the farm bill is $3.86 per bu.
“The U.S. program is going to be aimed at keeping farmers into growing their traditional crops,” he said.
That will put downward pressure on world wheat and feed grain prices, making pulses a more desirable option for Canadian farmers.
Furtan also points out that pulses are only eligible for loan rates, which is one of the three types of payments available under the American subsidy program. Crops like wheat and corn can also generate production flexibility payments and lucrative counter cyclical payments.
“That’s where the really nice payments come for U.S. producers,” said the analyst.
“The incentive here is to make sure you at least grow as much wheat and corn as you used to at the current prices.”
It’s one more reason Furtan thinks American farmers will stick with traditional grains and oilseeds in 2003 at the expense of pulse acres.
But Furtan said his farm bill analysis is just one piece of the puzzle when it comes predicting what U.S. and Canadian farmers will grow. Other factors that may come into play are weather patterns, cost of inputs and crop insurance coverage levels.
In other news from the Pulse Days conference, Saskatchewan Pulse Growers announced that Ron Hundeby of Elbow, Sask., has been re-elected to its board of directors. Growers also elected Lloyd Affleck from Beechy, Sask., who is new to the board.
Shawn Buhr of Lucky Lake, Sask., is the group’s new chair. He took over from Glenn Annand on Jan. 6.
