The head of the Canadian Wheat Board brushed aside criticism last week that initial payments for the 1998-99 crop year are too low.
Lorne Hehn views the initial prices as realistic considering the state of world markets. With world wheat production expected to approach near record levels this year, wheat prices are at their lowest in more than four years.
“When you’re at that low a level of price, it doesn’t take much of a shift one way or another to incur a great deal of risk,” said Hehn, the wheat board’s chief commissioner.
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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
“Our interest is in giving the revenue from the sales into the farmers’ hands as quickly as possible without incurring undue risk.”
Initial payments are guaranteed by the federal government. The payments are traditionally set at 70 to 75 percent of the expected total return for the year. This year’s Aug. 1 initial for wheat falls within that range.
However, in a prepared statement, the Western Canadian Wheat Growers Association said the initial pricing system exaggerates the effects of a soft market. Conservative pricing at the start of the crop year leaves farmers strapped for cash, said Kevin Archibald, the association’s vice-president.
A voluntary marketing system, allowing farmers to sell their own wheat outside the wheat board, is needed, Archibald said. Many farmers have switched to nonboard grains and special crops because of a wider range of marketing options that allows them to pay their bills, he said.
No mention of raises
Last year, there was talk of raising the Aug. 1 initial payments soon after they were announced. A rebound in world grain markets allowed the initials to be raised on Sept. 23.
However, there was no talk last week of a similar scenario unfolding this year. The market is bleak and there are no immediate signs of improvement, said John Duvenaud of the Wild Oats Grain Market Advisory newsletter in Winnipeg. Taking that into account, Duvenaud believes this year’s initial payments are reasonable.
“Right now, it’s iffy maintaining the ones we’ve got. It’s not a good price, but it’s realistic with where the world market is at.”
