Farmers thinking about seeding winter wheat this fall have a new factor to take into account.
Changes to a Canadian Wheat Board freight program will result in higher rail freight rates for winter wheat producers in Manitoba and eastern Saskatchewan in the 2009-10 crop year.
“It is going to impact their returns, so farmers should definitely be aware of this and pencil it out for the coming year,” said Charray Dutka, manager of operational inventory for the CWB.
Contacted two days after the wheat board’s announcement, Jake Davidson, executive director of Winter Cereals Canada, said he knew nothing about the change and couldn’t predict what impact it might have on farmers’ plans for growing winter wheat this year.
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The increase in freight rates is the result of the board’s decision to introduce a separate freight adjustment factor (FAF) for winter wheat, which now has the same FAF as spring wheat.
Dutka said the new system will better reflect the reality of the winter wheat market.
“We’re doing this because most of the market for winter wheat tends to be off the West Coast, while most of the production is now in the eastern Prairies,” she said.
“This will allow us to capture a greater portion of the rail costs required to move the product to market.”
The FAF is designed to deal with the fact that it costs more to ship grain from the central Prairies to export position on the East Coast than on the West Coast because of St. Lawrence Seaway charges.
Currently, the FAF for wheat (including winter wheat) is set at $12.35 a tonne.
The freight rate charged to farmers when they deliver to an elevator is either the freight to Vancouver or the freight to Thunder Bay plus the $12.35 FAF, whichever is less.
Based on projected 2009-10 sales and current production patterns, the board is projecting the FAF for winter wheat will be $15 to $20 a tonne.
The new higher FAF will be added to the basic freight rate, which will increase freight charges on winter wheat by $2.65 to $7.65 a tonne (the difference between $12.35 and the new range of $15 to $20).
The FAF is a complicated program that can confuse anyone without a degree in economics.
On its website, the CWB provides examples of how the new winter wheat FAF will affect freight rates in 2009-10 at three specific prairie delivery points. All examples assume the FAF on winter wheat increases to $17.50 per tonne in 2009-10 and are based on 2007-08 freight rates.
- A farmer in Indian Head, Sask., currently pays freight to Vancouver. That will continue to be the case in 2009-10 under the new program.
- A farmer in Fairlight, Sask., near the Manitoba border currently pays freight to Thunder Bay plus the $12.35 wheat FAF. In 2009-10, with the separate winter wheat FAF, this delivery point will move into the west coast catchment area. The farmer would pay freight to Vancouver, which would mean an increase of approximately $2.50 per tonne for freight on winter wheat.
- A farmer in Brandon currently pays freight to Thunder Bay plus the $12.35 FAF. In 2009-10, the rate will be Thunder Bay freight plus the new winter wheat FAF of $17.50. As a result, the freight rate will increase by $5.15 (the difference between $12.35 and $17.50.)
