The federal government is being urged to increase initial payments on Canadian Wheat Board grain.
The Western Canadian Wheat Growers Association says the payment levels are “extremely low,” especially when high fuel and fertilizer prices are taken into account.
Wheat growers president Cherilyn Jolly-Nagel said with world prices at low levels, the government wouldn’t be taking on much additional financial risk by boosting the initials.
“In our view, there’s room to move these initial payment prices upwards,” she said.
In a rare display of agreement, the association and the CWB are on the same page when it comes to the initial payments.
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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
“Absolutely they’re too low,” said board spokesperson Maureen Fitzhenry.
“We said that when we put in our recommendations in the summer, but the federal government decided they needed the risk levels they eventually put in place.”
The 2005-06 initial payments range from 57 to 70 percent of the board’s Pool Return Outlook for the various CWB grains.
For example, for No. 2 CW 13.5 percent protein wheat, the initial payment of $125.40 a tonne represents 65 percent of the Pool Return Outlook of $194 a tonne.
The association noted that when deductions for freight and handling are taken into account, things look even worse.
At an elevator point in Saskatchewan, the net return to the farmer for No. 2 13.5 is a little more than $70 a tonne, representing about 50 percent of the PRO of $139.32.
The wheat growers association said the low CWB payments also have a depressing effect on markets for off-board feed grains and can even affect non-board grain.
“That why it’s extremely important that initial payments be set as high as good prudence will allow,” Jolly-Nagel said.
The federal government has been extremely conservative in setting initial payment guarantees ever since it had to cover an $80 million deficit in the 2002-03 wheat pool account. Before that, the guarantee was generally set around 75 percent of the anticipated final return.
Lise Jolicoeur, press secretary for CWB minister Reg Alcock, said the government wants to maintain its guarantee at around 65 percent of anticipated final price, but that doesn’t mean the initials can’t be higher.
“The CWB is free to set the initials higher if it wants to assume the risk over 65 percent, which is what we’ve established it on,” Jolicoeur said.
Fitzhenry said the board has not formally asked the government for an increase, saying it needs to wait until it has more solid information on world grain markets and the size and quality of the harvest in Canada to make a convincing case to Ottawa.
“We haven’t yet reached that point,” she said, adding that the CWB directors will be considering the issue at their meeting during the week of Sept. 26.
She added that while higher payments are needed, farmers can use a number of CWB programs designed to help with cash flow, including the early payment option, which provides immediate payment of 80 to 100 percent of the PRO less program discounts, and the pre-delivery top up of $30 a tonne for farmers with cash advances.
“It’s not the total solution, but it helps,” she said.
