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CWB corrects erroneous price comparison
Price comparisons that were made publicly between Ontario and western Canadian wheat at the end of January are incorrect. The following letter to the editor addresses this issue. Similar letters were sent to a number of rural newspapers.
February 9, 2007
Letter to the Editor
It was suggested in the February 1 issues of the Manitoba Cooperator and Farmers Independent Weekly that an Ontario farmer currently selling hard red spring wheat with 13.5 per cent protein would receive $5.50 per bushel, whereas a grower on the Prairies selling 1CWRS would receive about $4.40 per bushel as a final pool return—approximately $1.10 less. The implication is that this is because of poor performance by the CWB. That implication is incorrect, because of several errors in the comparison.
To begin with, the comparison relates a spot price (the Ontario price) to a pool value (the CWB Pool Return Outlook). This is a misleading comparison. A pool value is by definition an average of prices achieved over an entire crop year. In a rising market such as we have experienced so far this crop year, a spot price is always higher than a pooled price. Is the CWB selling wheat at those “high” Ontario values and returning those dollars to farmers? Yes. In fact, CWB values are even higher, as noted below.
The Ontario farmer spot price of $5.50 per bushel is presumably a price at or near an Ontario mill. Therefore, an appropriate comparison would be the current price of CWB wheat landed at an Ontario mill. On February 5, the CWB offered eastern mills No.1 CWRS with 13.5 per cent protein for $230.47 per tonne at Thunder Bay. Add to this freight charges of $25 from Thunder Bay to the mill, and the landed price equals $255.47 per tonne or $6.95 per bushel.
The comparison, then, is between $5.50 per bushel of hard red spring wheat to the Ontario farmer and $6.95 per bushel for CWB wheat sold in Ontario. This $6.95 per bushel would be added to the pooled payments western farmers receive for wheat sold throughout the 2006-07 crop year. Because the CWB’s Ontario sales prices are based on competitive North American values, western farmers can obtain similar cash values today under the CWB’s other pricing options such as our Daily Price Contract. It appears that Ontario farmers are receiving prices that are significantly under current market values.
The truth, therefore, is the exact opposite: CWB prices are higher.
Sincerely,
Gord Flaten,
CWB Vice-President of Marketing