Wheat farmers see tough market
Canada selling into glut of lower grades
Expectations of a large, but relatively low-quality wheat crop have dashed farmers hopes of recouping losses sustained over the past few years.
Weather conditions in the first part of the summer made farmers hopeful that this would be a banner year, but with the harvest well underway, it’s safe to say that 2005 will be disappointing.
“It’s becoming more clear that quality is going to be an issue,” said Maureen Fitzhenry, a spokesman with the Canadian Wheat Board. “ The quantity is still there — our production estimates have not changed at all — but there’s not as much highgrade wheat as we’d hoped,” she said.
Citing inclement weather, Australia and Argentina slashed their production estimates for wheat earlier this year. There was some hope that Canada would stand to benefit from that, but the shortfall was quickly replaced by a huge 33% increase in exports from Russia, Ukraine and Kazakhstan. Much of that grain was of a lower quality.
The global surfeit of wheat this year could pose a problem for Canadian farmers hoping to recoup losses after several years of fluctuating profits.
“Farmers are notorious for always assuming that this will be the year [to recoup losses],” says Hartley Furtan, a professor of agricultural economics at the University of Saskatchewan, “so they were certainly hoping for a good year.
“ It’s a bit of a mixed bag, but it looks pretty dismal in parts,” Mr. Furtan said.
Historically, Canada’s competitive advantage has been that the quality of Canadian wheat is second to none, Ms. Fitzhenry said. But this year that may not be the case and as a result, the wheat board is in the unfamiliar position of trying to sell a large quantity of lower-grade Canadian wheat.
“Virtually every country in the world can churn out low-grade wheat,” Ms. Fitzhenry says, “But Canada is used to producing the good stuff and we’ve carved out markets willing to pay a premium price for it.”
In a good year, roughly twothirds of Canadian wheat is rated in the top two grades. Though the harvest is not yet complete, the early indications are that this year’s ratio will not be as high.
A spokesman for Saskatchewan Wheat Pool, the second-largest grain handler in the country, suggested this week that about 40% of Canada’s 2005 wheat crop should achieve the top two grades this year.
Last year, though the yields were good, only about 30% of the wheat produced was high quality, Ms. Fitzhenry said.
“It was the most challenging year in terms of marketing that anyone can remember,” she said. “We sell to contracts — we try to match what we have to sales opportunities. But doing that matching becomes difficult in a year where you’ve got huge quantities of predominantly lower grade crop.”
“Last year was bad, and we were hoping for much better,” Ms. Fitzhenry said. “ We will do slightly better than last year, but it won’t be as high as we’d hoped.”