THE CANADIAN SCENE COMMUNIST BUYING BRINGS WHEAT BONANZA TO THE WEST

Press, Volume CVI, Issue 31276, 24 January 1967, Page 12

THE CANADIAN SCENE COMMUNIST BUYING BRINGS WHEAT BONANZA TO THE WEST

(By a special correspondent of the "Financial Times", London) (Reprinted by arrangement from the “Financial Times")

The opening of large-scale markets for wheat in Communist countries is causing a major shift in the structure of Canadian agriculture. Farmers in Manitoba, Saskatchewan and Alberta, the main spring wheatproducing provinces, are moving rapidly toward specialisation in wheat for export markets at the expense of livestock and feed grain production.

For farmers, the result has been a rise in the return on capital employed from about 5 per cent prior to 1961, to a range of 6 to 8 per cent in recent years. For Canadian consumers, who had grown accustomed to relatively low food prices, the likely result will be a permanently higher retail price level for most meats, as supply-demand adjustments cause rising prices for feed grains and feeder cattle.

Shipments to Communist countries began on a contnuing basis in 1961. Since then, Russia, Poland, Czechoslovakia and China have consistently taken one-quarter to one-half of Canada’s total wheat exports. Sales to Russia and China in the 1965-66 crop year amounted to 301 million bushels, or 48 per cent of Canada’s wheat exports. Land Prices Soar The, profitability of wheatgrowing has caused land prices to soar. In Saskatchewan, which produces twothirds of Canada’s wheat, the average price of farmland rose from $37 (about £l3) an acre in 1961 to $66 (about £24) in 1965. The provincial government estimates the price reached $75 (nearly £27) an acre in 1966. Most of the land being sold is added to existing farms, enabling buyers to pay more than they could afford to pay for complete farms. High land prices have induced many small farmers —who are unable to compete

for more land to enlarge their own holdings—to sell out and to seek work in the cities. The last census, in 1961, indicated that the number of farms in the three prairie provinces had fallen by one-third in 20 years, from 296,469 in 1941, to 210,442 in 1961. The average farm size in Saskatchewan during this period increased by 59 per cent to 686 acres.

The trend towards farm consolidation, evident in each of the three provinces, appears to have quickened since 1961. Provincial government farm economists predict the number of prairie farms will be cut in half by 1980. Meanwhile, farm enlargement has proceeded most rapidly in the predominantly wheat - growing areas of the southern plains. This reflects the more rapid technological improvement in grain cultivation and harvesting machinery than in live-stock-raising equipment. In the broad central belt of parkland, or aspen grove, country extending through the three provinces, the considerable amount of unimproved land per farm has encouraged the raising of cattle to utilise sloughs and wooded land. This pattern of farming under the impact of export demand, is quickly giving way to specialisation in wheat. Federal authorities estimate that about 700,000 acres of land in Western Canada, chiefly in the parkland belt, have been broken and cleared each year since 1961. This represents a total

area of new land in the last five years equal to 5500 square miles. Cost of land clearing in the parkland belt, using heavy equipment, averages $35 to S4O (about £l2 10s to £l3 10s) an acre. This is less than the cost of buying additional land, but more than can be justified by cattle production under Western Canadian conditions of low hay yield—less than two tons per acre annually. The result is that newly broken land is normally planted to wheat, and fewer resources are available for cattle production.

The attractiveness of wheat growing, which is less laborious as well as more profitable than livestock production, has caused the failure of provincial government policies aimed at encouraging stability through diversification. Poultry, turkey and hog production has slumped, especially in Saskatchewan, and many farmers have reduced (also frequently eliminated) their cattle herds. Fewer Cattle The June 1 survey of cattle population indicated there were 3.3 per cent fewer cattle in the prairie provinces than there had been a year earlier. Agricultural authorities in the area believe a revival of the cattle industry is dependent—unless beef prices rise sharply—on development of highly efficient, specialised cattle operations such as are starting to appear in parts of Alberta.

Meanwhile, wheat acreage is rising steeply. Prairie farmers in 1965 and 1966 planted an average of 28,785,000 acres to wheat or 6 million acres more than in 1960-61. The increase | has been made possible chiefly by the clearing of 13,500,000 acres of new land in the last five years, but there has also been a reduction in acreage devoted to summerfallow, oats and, to a lesser extent, barley. Emphasis on wheat is a response partly to exceptionally high yields. Western Canada has harvested five bumper crops in succession, with an average output of 647 million bushels a year—26l million bushels above the 1957-61 average. Ability to sell has of course, been an even bigger incentive. The Federal Department of Agriculture predicts that Canadian wheat exports will run at 475 million to 550 million bushels annually to 1970—and probably, for a longer period. Added to domestic consumption of 150 million bushels or more, this would produce an annual market for 625 million to 700 million bushels. Even the low figure represents more wheat than Canada has produced in all but its three most exceptional years. I.W.A. Prices Strong demand has caused wheat prices to rise from $1.65 a bushel in the wheat surplus of the late 1950 s to $2.13 in December last. The current price is within 5 cents of the International Wheat Agreement ceiling. In the current I.W.A. discussions, Canadian negotiators are understood to have argued that the present and prospective world supplydemand balance in wheat justifies a 20-cent a bushel advance in prices. For prairie farmers the prospect of wideopen markets and, perhaps, a higher price adds up to the biggest wheat bonanza the west has ever seen.