The USDA released its first projection of what farmers intend to plant this year. While few seeds have actually been injected into the soil, the market responded to the report as though the crops had emerged. The report indicates farmers intend to plant more acres in soybeans, fewer in corn than last year. Futures markets responded accordingly, at least initially. Wheat futures prices jumped on news fewer acres of winter wheat had actually been seeded last fall than previously thought.
The wheat market, though, is influenced by fundamentals beyond just supply and demand. For U.S. producers, the markets, especially the export sector, is a source of political rancor.
Sen. Byron Dorgan, D-N.D.: "The Canadians are not playing fair with respect to grain trade."
For more than a decade now, wheat state lawmakers like North Dakota Democrat Byron Dorgan have been lambasting Canadian wheat trade practices … while at the same time trying to prod the U.S. government into taking retaliatory action.
The target of contention is the Canadian Wheat Board. Based in Winnipeg, the board controls wheat and barley exports for Canada's western provinces. Exports to the U.S. account for about 10 percent of the board's revenues, upwards of $300 million a year.
But critics say the board's monopoly over Canadian wheat exports has le to the dumping of cheap grain in the U.S. Indeed, as far back as 1991, Dorgan was one of the few dissenting votes on the Canadian Free Trade Agreement.
Dorgan: "… the Canadian Wheat Board has taken sales from U.S. farmers and is able to do so because it is insulated from commercial risks, benefits from subsidies, has a protected domestic market and special privileges, and has competitive advantages due to its monopoly control over a guaranteed supply of wheat."
Seven years ago, there was even a brief groundswell among some Canadian farmers opposed to, among other things, the board's trade policy.
Those critics got a boost this week with the announcement that a World Trade Organization panel will mediate the dispute. U.S. trade officials had requested the three-member panel in March after talks broke down. At the same time, the U.S. imposed a nearly 4 percent preliminary tariff against imports of Canadian durum and hard red spring wheat.
The just-appointed WTO panel will review U.S. allegations the Canadian government provides an unfair advantage to its wheat farmers by granting the wheat board specials monopoly rights … and by subsidizing the cost of shipping wheat by rail.
The North Dakota Wheat Commission has for years filed complaints with the U.S. Trade Representative seeking relief. But it was only last December that the U.S. brought the matter before the WTO. A decision from the panel is not expected for at least six months.