Wet weather to cost Prairie farmers $3B

Heavy rainfall and flooding in the Prairies could cost farmers in the region up to $3 billion but it’s not likely to drive up food costs at the local checkout counter, at least not yet, experts from Bank of Montreal said Friday.

On average, farmers in Saskatchewan and Manitoba have been forced to leave 20% of their crops unplanted this season.

Crops from seeds that were sown are stressed and harvest is an estimated to be one to two week behind normal.

“For many, this is a very real crisis – to put it in perspective, we are getting in the range of the economic impact of the BSE crisis seven years ago, which cost farmers $5 billion,” said Douglas Porter, deputy chief economist, BMO Capital Markets.

The Canadian Wheat Board forecasts Canada will have the smallest area planted to wheat since 1971, an 18% reduction from last year.

“For some farmers it’s a pretty significant blow,” said BMO senior economist Kenrick Jordan, adding increases in in soybean, corn, canola and lentil planting is helping to offset the wheat shortage for farmers.

Higher wheat prices will also help soften the impact.

Wheat prices have surged in recent days as global wheat supply is being further choked by severe drought in Russia. The country announced Friday it will be forced to halt all exports of the grain starting Aug. 15.

North American wheat futures have shot up 50% this month alone in their biggest percentage gains since 1959. Prices are hovering around $8 US per bushel, the highest levels since the rally of 2008. Wholesale prices in Europe are following similar patterns.

Jordan said consumers will only notice a jump in grocery store prices if wheat futures keep trending upward at today’s speed, which is unlikely because world supply is still in good shape.

Even in a worst case scenario, it could be months before shoppers notice a change in the cost of a loaf of bread.

BMO has set up an emergency relief program to help commercial customers affected by the damage, including deferred principal payments and waiver of new and renewal loan fees.

“This program will help alleviate the difficulties being faced by farmers in affected communities across Canada’s Prairies,” said Robert Hayes, senior vice president, Prairies, BMO Bank of Montreal.