Newsroom
2002
July 31, 2002
CWB announces 2002-03 initial payments by grade; seeks adjustment
Winnipeg -- The Canadian Wheat Board (CWB) today announced the 2002-03 initial payments for the various grades of wheat and barley. The payments are effective August 1, 2002 for deliveries into the 2002-03 pool accounts.
These initial payment recommendations were forwarded to the Government of Canada for analysis and approval prior to the severe crop deterioration in North America and therefore do not take into account the corresponding rise in prices. As such, the CWB will be requesting an adjustment payment for wheat, barley and designated barley based on higher anticipated pool returns. The Government of Canada has committed to handling the request quickly.
The initial payments, in dollars per tonne, for base grades in each pool account are listed below. A complete listing of payments for all grades in dollars per tonne and dollars per bushel is posted on the CWB Web site (under the payments link) at www.cwb.ca.
| Grade | 2002-03 Initial Payment |
2001-02 Initial Payment |
|
| Wheat | No. 1 Canada Western Red Spring 12.5 | $149 | $160 |
| Durum | No. 1 Canada Western Amber Durum 12.5 | $175 | $169 |
| Feed Barley | No. 1 Canada Western | $105 | $110 |
| Designated Barley | Special Select Canada Western Two-Row | $147 | $164 |
| Designated Barley | Special Select Canada Western Six-Row | $132 | $136 |
Initial payments represent the first portion of the returns farmers can expect from the sale of their grain over the entire pool year. The Government of Canada guarantees initial payments.
Initial payments are set in relation to world prices and, as such, they will vary from year to year according to changing market conditions. During the crop year, the CWB reviews the initial payments on a regular basis and recommends adjustment payments as soon as market conditions and sales progress warrant.
The attached commentary describes the current market situation upon which the adjustment payment recommendation will be based. Initial payments should not be confused with monthly Pool Return Outlooks (PROs) which are the CWB’s estimates of year-end returns in each of the pool accounts.
Controlled by western Canadian farmers, the CWB is the largest wheat and barley marketer in the world. As one of Canada’s biggest exporters, the Winnipeg-based company sells grain to more than 70 countries and returns all sales revenue, less marketing costs, to Prairie farmers.
Market outlook for the 2002-03 crop year
Wheat (excluding durum wheat)
Wheat returns in the 2002-03 crop year are expected to average above those experienced in 2001-02 as global wheat supplies, particularly those in North America, tighten significantly. The United States Department of Agriculture (USDA) is currently projecting global wheat ending stocks to fall substantially in 2002-03 as world wheat consumption is projected to outstrip production for the fourth year in a row. World wheat trade is forecast to fall in the upcoming year as lower demand projections for the European Union (EU), Africa and the Middle East are expected to more than offset increased imports into the Asia-Pacific and Latin America regions. Smaller area, hot weather and extensive dryness across a large portion of Western Canada have drastically reduced production potential. Similar weather conditions in the major hard red winter and spring wheat producing regions of the U.S. have reduced supplies of high quality wheat in the U.S. as well. Drought conditions in Australia have reduced seeded area prospects while dire economic circumstances in Argentina have made it difficult for farmers to get their crops planted. While improvement in higher quality hard wheat prices for the 2002-03 crop year is anticipated, abundant export supplies in the EU as well as in a number of minor exporting countries are expected to ensure that the export market remains competitive, especially in the lower quality segment of the market.
Durum wheat
World durum import demand is forecast to weaken slightly in 2002-03. With a record crop in the EU, import demand is expected to drop back to more normal levels. At the same time however, increased import demand from North Africa is expected to largely offset the decline in the EU. Increased acreage in Western Canada combined with reasonable rainfall to date in the durum producing region is expected to boost production well above last year’s drought-ravaged crop. Conversely, poor quality over the past two years has prompted U.S. producers to further reduce seeded area. Combined with recent heat stress, U.S. durum production is expected to be even smaller than 2001-02. That being said, with good crops in a number of minor exporting countries, the global export market will continue to be very competitive. Thus, with another year of significant supplies, prices for all grades of durum in the upcoming crop year are still expected to soften from current levels, assuming the quality profile of the U.S. crop returns to normal (i.e., improves relative to 2001-02).
Feed barley
Offshore feed barley values are expected to weaken in the coming year. A big crop in the EU and aggressive export competition from Eastern Europe and the Former Soviet Union are expected to keep significant pressure on global feed barley values. Global import demand is also expected to be weaker, largely in response to good crops in the Middle East. However, hot dry weather in Western Canada has sharply reduced production prospects in spite of increased acreage. The resulting strength in the domestic feed market will limit Canadian exports. Low carry in stocks in the U.S. are expected to largely offset increased production, leaving little room for the U.S. to expand exports. Expectations for a smaller barley crop in Australia and tightening U.S. corn stocks are also expected to provide some support.
Designated barley
Global malting barley prices are expected to remain relatively stable in 2002-03 compared to the previous year. Smaller six-row acreage, drought-reduced two-row production and a very strong domestic feed market in Western Canada will limit malting barley supplies available for export. With strong Chinese import demand expected again in 2002-03, global import demand is expected to remain near record levels. However, big export supplies in the EU and above normal export supplies in Australia are expected to keep pressure on prices in this market. Thus, with large global exportable supplies of two-row malting barley in the upcoming year compared to the relatively tighter Canadian six-row supply situation, the price spread between two-row and six-row is expected to narrow relative to last year’s wide levels.