What’s on your mind? Question #1 from Alberta Farmer readers

Carry-out and wheat prices

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EDITOR’S NOTE: We asked a sampling of producers what was on their mind as they were headed into the growing season, and then reporters Alexis Kienlen and Jennifer Blair went looking for answers.

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Bentley-area producer, Jason Lenz photo: Supplied

Bentley-area grain producer Jason Lenz asks, “How will the large carry-over affect new-crop wheat prices?”

It’s the world market that sets wheat prices — what Alberta farmers have to worry about is basis.

AgCanada estimates total ending stocks for all grains will be 22.8 million tonnes at the end of the crop year on July 31. That raises the spectre that grain bins will still be full at harvest and the wide basis seen this winter will continue.

But that’s too gloomy an outlook, said market analyst Errol Anderson.

“My feeling is that the rail transportation problem that we had this winter will be alleviated,” said Anderson, president of ProMarket Communications in Calgary.

“The transportation issue hurt our movement and in part, it created this surplus, but in the big scheme of things, it boils down to world demand.”

Once there is strong grain movement to port, cash bids for Canadian growers will go up as long as world demand is strong, he said.

“My thought is that we’ve gotten through that, and it is eventually going to repair,” he said. “So the terrible basis levels we saw this winter will be a thing of the past.”

Anderson is not alone in his view. If sales and rail movement are strong, the carry-over number will drop dramatically from July 31 to early fall, said Derek Squair, president of Agri-Trend Marketing.

At the upper limit of 11,000 rail cars a week, stocks will drop by one million tonnes weekly, although Squair said something in the 8,000-car range is more likely.

So would a flood of Canadian wheat onto world markets depress prices? No, says Anderson. We’re a distant sixth in the list of top wheat-producing nations, and Anderson notes that what happens to wheat production in Europe, China, the U.S., and Russia this year will have the biggest impact on prices.

“We’re going to respond more to the global market than we will to the domestic situation,” he said.— Alexis Kienlen

More answers to producer questions in the April 28 edition of Alberta Farmer.

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