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CWB ends 2007-08 with record pool revenue

Strong sales and high prices generated record returns for Prairie grain farmers from the Canadian Wheat Board this past year.

The CWB ended the 2007-08 grain year with a record $8.4 billion in gross pool receipts for wheat and barley. The net return to farmers after marketing costs is $7.8 billion, board chairman Larry Hill announced.

The amount is nearly twice the $4.9 billion grossed by the CWB pool in 2006-07 and still higher than the $3.5 billion grossed in 2005-06.

It even eclipses the $7.6 billion gross ($7 billion net) pool return which the board predicted earlier this summer.

The results are unofficial since the board sent its year-end financial results to Ottawa only last week.

Record grain prices, which have since fallen, led the CWB to its exceptional results in 2007-08, Hill told the National Farmers Union annual convention.

He acknowledged this isn’t something that happens every year. “But in a year of rising prices like this, the pool paid farmers big. It paid my farm in a huge way.”

World grain markets went on a wild ride in 2007-08, rallying to record levels with unprecedented volatility, Hill told the NFU. Global supply and demand led to “tremendous opportunities” for western Canadian farmers.

Wheat prices fluctuated wildly, topping out briefly at an incredible $24 a bushel in February, for a total range of over $16 a bushel. This made the previous record price spike in 1995-96 look puny by comparison, said Hill. Back then, wheat went from a low of US$3.37/bushel in March 1995 and to a high of US$7.32/bushel in May 1996.

The CWB 2007-08 pool return outlook (PRO) at a Saskatchewan farm gate is $8.44/bushel for wheat and $12.30/bushel for durum.

Hill predicted returns will be down significantly in 2008-09 because of a drop in U. S. commodity prices, a large crop in Europe and a decent one in Australia after several years of drought.

The CWB October PRO for wheat at a Saskatchewan elevator is around $6.50 a bushel for #2 CWRS with 13.5 per cent protein.

A large carry-over into 2009 will “tax our system to the limit to get it out,” said Hill.

The CWB chairman credited the board’s pooling system for giving farmers an extra $560 million in added pool revenue in 2007-08 compared to what U. S. producers received. Most American farmers sold wheat in the $5 to $6/bushel range, while the CWB averaged $2/bushel more than that, Hill said.

This disproves wheat board opponents’ claims that the CWB sells for less than they could capture themselves in the U. S., he said.

Such criticisms were rife between June and September 2007, when the board’s wheat PRO was around $7/bushel and daily spot prices south of the border were higher. But the CWB, sensing supply and demand justified higher prices, led the market in steadily raising its PROs throughout the year, said Hill.

Although the global financial crisis makes for an uncertain outlook in 2009, several developments work in the wheat board’s favour, he said.

For one thing, ocean shipping costs have collapsed. The price of renting a 65,000-tonne freighter has dropped to $7,000 a day from a daily high of $70,000. This reduces the CWB’s expenses considerably. For example, the cost of shipping barley to Saudi Arabia is $20/tonne less, Hill said.

Another favourable factor is a sharp decline in the Canadian dollar. A year ago, the loonie rallied to a value of US$1.1039. Last week, it was trading below US80 cents.

“The weakening Canadian dollar is actually a positive factor when we look at some of the components that go into our returns as grain producers. It helps offset some of the weakening we are seeing in commodity prices,” Hill told the NFU. [email protected]

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