Western Canadian grain farmers’ returns were up 57 per cent in 2007-08, an exceptional year marked by record-high grain prices and a roller coaster ride through unprecedented market volatility, all outlined in the newly released CWB annual report.
Prairie farmers earned a record $7.2 billion from their wheat, durum and barley, with total pooled revenue up 47 per cent for wheat and up 94 per cent for both durum and designated barley.
The CWB far surpassed its targets for achieving higher prices than international competitors, realizing a net $13.81 per tonne above competitors’ values for wheat and $48.84 for durum, versus targets of $6.90 for wheat and $24.50 for durum. For designated barley, the CWB achieved $29.47 per tonne above competitors’ prices, slightly below the target of $33.70.
“The combination of single-desk marketing and pooled pricing worked very well for farmers in last year’s highly volatile international marketplace,” said Larry Hill, chair of the CWB’s farmer-controlled board of directors. “Not only was the CWB able to capture high international prices, its marketing structure allowed Prairie farmers to participate in price rallies when supplies were depleted in most other exporting nations.”
Hill said the volatile marketplace was not without its challenges for all participants in the grain markets. In the CWB’s case, the extreme volatility of futures and basis values, plus a large forward inverse in market values from December 2007 to March 2008, created risk-management issues for its Producer Payment Options (PPOs). Particularly challenging were the often poor correlations between U.S. futures markets and prices in other markets into which the CWB sells, coupled with the volatile basis levels. This led to a deficit in the contingency fund that underwrites risks associated with the PPOs and cash trading. The deficit is currently at $28.9 million.
“In these extraordinary market conditions, many grain companies chose to withdraw some of their pricing options, but we believed it was important to honour our commitment to Prairie farmers by continuing to provide these programs, ” Hill said.
The CWB launched several important initiatives in 2007-08: a new approach to contracting malting barley called CashPlus, an innovative network of weather stations, a series of new e-Services for farmers, new branding initiatives including national campaigns to promote Prairie wheat to Canadian consumers and a number of new or modified pricing and delivery options for farmers.
Financial reporting in this year’s annual report has been changed to comply with new Canadian accounting requirements for financial instruments.
The annual report has been posted at www.cwb.ca. Hard copies can be ordered by e-mailing questions@cwb.ca or calling 1-800-275-4292. A summarized version will be mailed directly to farmers in March as an insert in the CWB’s Grain Matters newsletter.
