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Booming grain prices put a spring in farmers' steps

by 5m Editor
1 October 2007, at 1:42pm

WINNIPEG - As the price of wheat soars to levels not seen in 30 years, Canadian grain farmers are riding a wave of global demand that could change the nature of food markets for decades to come.

In the past year, wheat prices have climbed almost 50 per cent to more than $7 a bushel, durum has doubled and feed barley is up 70 per cent.

"We'll most likely see record years in everything," said Doug Chambers, manager of Quality Grain Marketing, a Calgary-based grain brokerage. "We've definitely moved into a new realm with grain prices, and you only have to go back 18 months to see feed wheat trading at $2 a bushel."

The surge is driven by rising prosperity in Asia and Latin America. A growing middle class is changing its diet to include a wider variety of foods, including dairy, beef and pork raised on grains, or breads and pasta from wheat and durum.

"We're seeing more of the world enjoy a higher standard of eating. As a result, they're prepared to pay more for more expensive forms of protein," Mr. Chambers said.

Another major factor is the ethanol boom in the United States, which has driven up the price of corn and has led farmers in the Midwest to plant more acres than in any year since the Second World War. The massive shift to corn production has reduced the world supply of other grains normally used as animal feed, and caused their prices to rise.

Meanwhile, world wheat production hasn't been able to keep pace with demand. Global reserves have been drawn down to their lowest levels since the early 1970s.

Some analysts argue that higher commodity prices, and higher food prices, are here to stay. The latest Canadian consumer price index show the price of meat is up 3.5 per cent from last year, while baked goods are 3.7-per-cent more expensive.

But long-term prosperity, may still remain just beyond reach. Livestock producers have been badly hurt by high feed costs and the soaring Canadian dollar cuts into any exporter's profits.

Al Mussell, a senior research fellow at the George Morris Centre, an agri-food think tank based in Guelph, Ont., says he is skeptical of those who say this is the start of 10-year boom.

Some U.S. observers also wonder whether the ethanol boom may be slowing, with the average U.S. ethanol price on the spot market dropping 30 per cent since May.

"More so than any other industry in the economy, agriculture has proven itself very adept at developing new technology to increase yields to allow supply to swamp demand very quickly," Mr. Mussell said.

Source: globeandmail.com

5m Editor