High grain prices not making farmers rich

Financial gains eaten up by high fertilizer prices

If you believe everything you read in the business pages, you might think Ernie Wiens is raking in the big bucks.

But Wiens, a LaSalle grain and oilseed farmer, says many people don’t realize that when prices went up late last year, most farmers had already sold the majority of their wheat at the old price.

“I’m not saying I don’t still have some grain in the bin, but a good chunk of my crops were sold before the prices went up,” says Wiens.

He says the increase in price helps, “but input prices are skyrocketing too.”

Ian Wishart, president of Keystone Agricultural Producers agrees.

“Fertilizer prices are out of control, and they could very well eat up many of the financial gains that farmers are expecting from higher prices.”

Net farm income for grain and oilseed crops rose 20 per cent in 2007, and the daily price limit for wheat has already doubled this year, going from 30 to 60 cents per bushel.

With those sky-high prices now in effect, it’s surprising to see the world’s inventories at a 30-year low; we are currently producing less grain than we’re consuming on a worldwide basis.

Marlene Boersch, managing partner of Mercantile Consulting Venture in Winnipeg says one of the reasons for this is a change in people’s diets.

“Oilseed and grain consumption in developing countries, especially India and China, has increased substantially.

“Before grain was always readily available at very short notice, but now some planning ahead is required,” says Wishart.

And it isn’t just farmers’ bank accounts that are suffering.

“Everyone in between, from grain companies to wholesalers to retailers, they’re increasing consumer prices far more than the increase they’re paying,” says Boersch.

Consumers may be holding thinner wallets, but as Winnipeg bakery owner Andy Kostniuk says, it’s the bakers who are really in a dire situation.

“You don’t quite believe it because you’ve never had to face it before. We’re not used to this as an industry, and consumers aren’t used to it either,” says Kostniuk, owner and manager of Harvest Bakery and Deli.

In the last month, the price of flour has increased by almost 80 per cent. And in the last 14 months, it’s gone up 300 per cent.

Paul Hetherington, president of the Baker’s Association of Canada, says “some bakers can quite literally calculate how long they can remain in business under this kind of pressure.”