I have wheat growing in the field. On the other hand, it might be a figment of my agricultural economic mind. Agronomist types might say that the wheat is dormant in the field and they’re probably right. However, when you look through things with an agricultural economic lens you always have one eye on the market and the other eye on what might be happening in the field. It just so happens that Ontario’s 805,000 acres of wheat this year is underneath a big blanket of snow helping to protect it.

The last time that I saw my wheat it was underwater which is never a good sign in January. So, I’m hoping water got away before it got really cold in the last several weeks. Interestingly enough, even though that wheat is underneath the ground it can be far away in many people’s minds.   The wheat market has shown a bit of life lately that will help when it sees the light of day come some warm spring day.

Let me give you some perspective.  Wheat futures have gained about $0.60 a bushel since the middle of January. Also too, wheat prices last summer when it was harvested were approximately $6.30 a bushel. That same wheat today is worth about $7.10 a bushel, a $0.80 per bushel increase.  For those of you who put wheat in the bin, at least at this point it has paid.  Presently, under the market conditions we see on February the 20th you can get approximately $7.50 for your wheat harvested off the combine this coming July and August.  In many ways, even these modest gains can be considered an earthquake in the wheat market.

In reality though, we should bring some perspective to this wheat market. In 2021 wheat prices exploded with the eruption of the Ukraine Russia war.  Ontario farmers at that time we’re able to hit $15 wheat off the combine if they had market order set. So that is about double the prices we have now and it’s unlikely we get back there anytime soon. The wheat market rallies very rarely and when it does It usually doesn’t last very long.

There are many reasons for that, but one of the biggest reasons is wheat is planted or harvested throughout the world in every month of the year. If there are gaps in production, they typically cause temporary shortages which are quickly filled in by all those other countries. At the present time Russia and Ukraine are some of the least cost producers of wheat exported into the world. Remarkably, they have maintained that during a hot war.

When you think about wheat here in Canada and the United States you often think about pastries and bread and cookies and crackers etc. In fact, they are full of carbohydrates and have lost favor through the years as some people might argue that has added to the obesity problem in this hemisphere. Interestingly enough I find it fascinating how some countries have huge wheat per consumption per capita.  For instance, Tunisia, Algeria and Egypt consume between 180 to 250 kilograms per person per year of wheat.   In the United States it is about 82 kilograms annually.   In other words, some of these North African countries were more than double the consumption of wheat then we have here. It’s amazing and almost hard to fathom.

I have not visited these countries but I’m sure if I did, I would see tangible evidence of increased wheat consumption versus here. Just think, if we can make other parts of the world consume wheat like they do in North Africa and Turkey we could make that wheat price more resilient.

In Ontario we export more than 50% of our wheat that we produce depending on our production.   As per usual anytime a Canadian agricultural commodity is exported onto the high seas we are competing for the cheapest price. That happens every year unless you have some type of production anomaly. About 60% of our Ontario wheat not exported is processed into baked goods such as cakes, cookies, pastries and crackers. The rest of it goes to animal feed and industrial use and then of course a lot of farmers keep back some wheat for seed.  The raison d’etre for wheat production in parts of southwestern Ontario is its soil conditioning nature on heavy soils. It gives a great crop rotation to improve yields on corn and soybeans.

Which is a good thing. Another good thing is the value of the Canadian dollar currently fluttering around $0.70 US which is one of the biggest reasons why wheat prices in Ontario are as high as they are.  If you close your eyes and imagine the Canadian dollar at 85 or $0.90 US, we will redefine why Ontario wheat is sometimes called “poverty grass”.  Prices would be a lot lower.

So, as we move ahead, the days will turn warm, and our wheat will reveal itself under the snow. After that, a few warm days might even turn it green again. Let’s hope it’s all there. At least if our wheat crop looks good by the end of March or the 1st of April, it makes for a good start for the rest of the crop year.