“As we go forward we recognize it’s something we have to keep our eye on… to manage them (costs) to a reasonable… cost per tonne.”
– BRITA CHELL
Western Canadian grain farmers earned a near-record $7.1 billion from sales made through the Canadian Wheat Board (CWB) in the 2008-09 crop year that ended last July 31.
Although per tonne wheat and durum returns are down substantially from 2007-08, the year when the CWB returned a record $7.2 billion to farmers, higher grain sales and good grain quality last crop year kept total returns up.
After elevator and freight deductions Manitoba farmers received around $246.70 a tonne ($6.71 a bushel) for No. 1, 12.5 per cent protein Canada Western Red Spring wheat in 2008-09, down 21 per cent from the $313.27 a tonne ($8.52) received the year previous.
Total wheat receipts in the pool in 2008-09 were up 19 per cent, while the total volume of grain pooled was up 10 per cent.
The CWB exported 18.4 million tonnes of wheat, durum and barley in 2008-09 up a million tonnes from the year before and the highest in nine years, the CWB said in a news release.
Details of the CWB’s earnings are summarized in its 2008-09 Report to Producers being mailed to farmers this week.
The full annual report is expected out this month after it’s tabled in Parliament.
CWB administrative costs of $79.1 million are up $3.4 million or four per cent. Most of the increase is due to a new Supply Chain Transformation (SCT) system.
The CWB keeps a close watch over expenses, Brita Chell, the CWB’s chief financial officer said in an interview March 5.
“We recognize there is a lot of sensitivity around them with some farmers out there,” she said.
“As we go forward we recognize it’s something we have to keep our eye on… to manage them to a reasonable… cost per tonne.”
The wheat pool’s administration costs totalled $52 million up from $46.1 in 2007-08. Still, the cost per bushel of 8.9 cents was down slightly from 9.3 cents due to a larger pool.
Although wheat and durum per tonne returns are down from 2007-08, it was a record-breaking year for malting barley. The CWB earned a record per tonne return for malting barley, with Special Select Canada Western Two-Row barley returning $314.05 a tonne ($6.84) in-store.
After deductions Manitoba farmers received around $258.74 a tonne ($5.33).
The CWB marketed a record 2.8 million tonnes of malting barley – 2.4 million tonnes through the pool and the rest through its CashPlus program.
The CWB says the CashPlus program proved itself. The designated barley pool was closed early in 2009 to protect the record returns it earned until
then. World malting barley prices were falling and accepting additional deliveries to the pool would erode its value.
CashPlus gave farmers the option to sell their malting barley at higher prices than they would’ve received in the domestic feed market.
The CWB also repaid the $25.5 million it borrowed from the pool accounts in 2007-08 to cover the deficit in the contingency fund used to backstop various price options for farmers outside the pools.
The CWB changed its risk management process, and that combined with market changes that were favourable to the programs, allowed the CWB to erase the deficit caused by the extraordinary market conditions of 2007-08.
The CWB met or exceeded most of the performance targets set by its board of directors. The CWB’s goal in 2008-09 was to earn on average $6.80 more a tonne for wheat than its competitors, $10.21 a tonne more for durum and $11.35 more for designated barley. The CWB says it got $6.65 more for its wheat, just under the target, but $15.37 and $14.66 a tonne more for its durum and designated barley.
The CWB wanted to accept 95 per cent of the wheat and 75 per cent of the durum farmers offered to sell; it accepted 100 and 81 per cent, respectively.
The target for net despatch earned by loading ships faster was $4.5 million and the CWB earned $7.4 million.
In 2008-09 Canada was again the CWB’s biggest wheat (excluding durum) customer at 1.9 million tonnes. But domestic sales were down from the previous crop year’s 2.2 million.
The CWB’s remaining top four wheat customers were Iran, Iraq, Indonesia and the United States at 1.5 million, 1.3 million, 934,000 and 868,000 tonnes, respectively.
“With the large Canadian production in 2008, there was an opportunity to serve demand from Iran and Iraq, two large but price-conscious buyers,” the CWB report says.
In 2007-08 Canada, Indonesia, Japan, the U. S. and Sri Lanka rounded out the top five biggest wheat buyers.
The domestic market was also the CWB’s biggest malting barley customer purchasing almost one million tonnes in 2008-09, up from 994,000 the previous crop year.
The U. S., China, Japan and South Africa were the next biggest buyers.
In 2007-08 the biggest buyers were Canada, the U. S. China, Latin America and Mexico.
In 2008-09 the European Union was Canada’s best durum customer buying 1.3 million tonnes, almost twice as much as the year before.
The other top customers were the U. S., Morocco, Algeria and Venezuela.
Fewer farmers, representing fewer tonnes of grain participated in the CWB’s producer payment and early payment options in 2008-09.
Around 11,000 farmers delivered 1.8 million tonnes under the Fixed Price and Basis Price Contracts compared to 18,000 farmers and 4.5 million tonnes in 2007-08.
Just under 1,400 farmers took the CWB’s Early Payment Option on 308,000 tonnes versus 9,534 farmers who took it on almost 1.8 million tonnes the crop year before.