If crop reports and market forecasts from the major wheat-growing areas of the world prove to be true, we will soon be in the midst of another wheat surplus. This includes the big production areas of Australia, South America, North America and the Black Sea countries Ukraine and Russia. Even traditional wheat-import areas like India and China are predicting modest surpluses, with some even being exportable.
How things change so quickly. Wasn t it a few years ago that there were riots in the streets in many countries over the high cost of wheat? As is said, starvation is usually just one bumper crop away from salvation.
Only the European area is showing static wheat production, which is not all due to weather issues. The Europeans have been steadily shackling their grain-growing production. It isn t just their opposition to GM plants that s causing production roadblocks, but they have been delisting herbicides and pesticides used elsewhere in the world. Add to that a pattern of land-use and environmental regulatory strangulation and many European growers are just giving up and getting the government to pay them to watch grass grow.
Perhaps North American grain growers should be thanking the European Union for deconstructing their commercial grain and corn production. The past has seen that when European farmers are given financial incentives and modern chemical production practices they can grow mountains of surplus grain. That s the last thing world markets need right now, or into the foreseeable future for that matter. Perhaps Canadian export agencies might be better to encourage Europeans to even further restrict their agricultural practices and GM technology. Clearly their food production would continue to decline to a point that they would have to significantly import even more grains and oilseeds. That would be good for grain producers everywhere.
Thankfully there is a substantial American ethanol market for corn. Without that outlet, corn could well have even further depressed wheat market prices. Interestingly, it wasn t too many years ago that a number of commentators were condemning ethanol plants implying that such operations would be taking food away from humans. Curiously, one does not hear much of that complaining anymore. In a twisted perspective to the food for humans angle, it now appears that a byproduct of ethanol, distillers grains, may actually increase the availability of barley for human consumption as it is displaced by distillers grains in cattle feedlot rations. But then that should see more cheaper beer, being people prefer to drink barley rather than eat it, but I digress.
You just know that as the wheat market declines, the Canadian Wheat Board (CWB) issue is sure to come back to haunt both sides. That s because history has an annoying habit of repeating itself. Surely proponents will crow that had the CWB stayed in place most wheat growers would have gotten some market access at a slightly better price. History has shown that the CWB had been able to at least get every grower some market access even in a depressed world market. Buyers have shown that when markets are up they are every grower s best friend, but when markets are down they only favour a few of their best friends, it s just human nature. The CWB I expect will be more lamented the longer the wheat market remains depressed.
Anti-CWB folks will just blame the depressed price and access situation on the free market, and that you have to take the good with the bad. Well that s fair enough, but I suspect some of those folks may push the envelope a bit too far and then expect the government to rescue them. In a tough market, big growers near the border will no doubt try to dump their wheat into U.S. elevators at any price, particularly if the Canadian loonie falls below par. That may not bother American growers when the market is high and there is plenty of elevator space.
But history shows that whenever American growers have low wheat prices they begin to blame imports from Canada and promptly launch a trade action to stop Canadian imports. It s happened nine times before and the CWB has had to come to the rescue each time. I expect history will repeat itself again, but this time the CWB will not be around to save the wheat growers hide.
Not to worry though, no Conservative party politician is going to eat any CWB humble pie if a trade action happens. Taxpayer money will be found to fight this inevitable old battle. I guess much will actually remain the same, it s just that the actors and their roles will be shuffled around.
Butyoujustknowthatasthe wheatmarketpricedeclines,the CanadianWheatBoard(CWB) issueissuretocomebackto hauntbothsides.