For the first time in months, Larry Sawatzky had good news to deliver.
Sawatzky is the Canadian Wheat Board’s market analyst charged with the task of explaining to farmers the board’s monthly pool return outlook.
In late December, after six straight months of outlining why the price outlook for wheat had gone down, he finally got a chance to explain why it had gone up.
“I guess it’s a bit of a Christmas present,” he said after the PRO was released Dec. 19.
Not a big change
Read Also
Canola support gets mixed response
A series of canola industry support measures announced by the federal government are being met with mixed reviews.
The new outlook doesn’t represent a huge turnaround in the market. For most classes of wheat the PRO was bumped up by about $5 a tonne, and there was no change at all for 1 CW red spring or CW Feed wheat.
But the hope is that any change in direction could alter the psychology of the marketplace.
“Up until now, with a falling market, a lot of buyers were just purchasing hand to mouth,” said Sawatzky. “Now that prices seem to have stabilized and may start moving up, hopefully we’ll see more buyers start coming to the market and that increased demand should help to support prices even further.”
Several factors have combined to halt the six-month slide in the PRO:
- Heavy rains in December disrupted the harvest in Argentina. Analysts say output could be reduced by about one million tonnes to around 15 million tonnes, and quality will definitely suffer.
- Cold weather in the hard red winter wheat area in the United States pushed up Chicago futures markets on fears of crop damage.
- India unexpectedly entered the market in December, looking to buy two million tonnes of wheat by March. The Indian government wants to replenish stocks in the wake of last year’s 1.5 million tonne export program and strong domestic demand from the world’s second largest population. Strong demand also came from Iran.
Sawatzky wouldn’t speculate on whether the recent developments mean the wheat market has bottomed out.
“We’ll just keep looking at it one month at a time,” he said.
For durum, the outlook was increased by $5 to $11 a tonne, reflecting steady import demand. The board issued its first PRO for 1 CWAD 13 percent protein at $221 to $241 a tonne, basis export position. Feed barley remained unchanged supported by strong demand from Saudi Arabia, while malting barley dropped by $3 a tonne, due to good crop prospects in Australia and continued subsidies on European Union exports.
Meanwhile, there was more good news for farmers as the year drew to a close, with the distribution of $260 million in final payments for the 1995-96 crop year.
There were no surprises, with the final prices closely matching the last estimated pool return released in September. The total payment for 1 CW red spring wheat was $254.16 a tonne (basis export position), while 1 CW amber durum was $186, 1 CW feed barley $205.49, special select CW two-row barley $248 and SS CW six-row $227.30.
Total revenue from sales of wheat and barley in 1995-96 was a record $5.8 billion. Record revenues were recorded in the malting barley pool ($620 million) and the durum pool ($1.1 billion). The wheat pool totalled $3.8 billion, while feed barley sales totalled $226 million.
The final payments represent the balance owing to farmers, after deduction of wheat board operating costs. Those costs, including salaries, travel, office expenses and computers were $1.92 a tonne, or five cents a bushel, in 1995-96.
