Long-Term Contracts Likely to Be Met : Canada Expected to Ration Its Wheat Supplies

Canada, which last year accounted for more than one-fifth of the world wheat market, will be forced this year to ration dwindling supplies among its most favored customers, officials and analysts say.

While the country’s drought-stricken farmers begin harvesting their smallest crop in 28 years, people in the industry say the government’s marketing agency is telling customers that it cannot meet all their needs.

“We have been in touch with our customers,” said Brian Stacey, information officer for the Canadian Wheat Board.

Stacey said the board will be able to meet the minimum, although not maximum, requirements of all long-term contracts with offshore buyers in the 1988-89 crop year. But he refused to comment on how particular customers will be affected.

Production Slashed

European traders say the secretive marketing board has already informed East Germany that it would be unable to supply the usual amounts of barley this year.

The United Grain Growers, representing 70,000 farmers in the Western Canadian bread basket, expects that the hot, arid conditions will slash grain production by about 30% to 32.8 million metric tons.

The amount of grain available for export is expected to fall to between 18 million and 19 million tons from a preliminary estimate of 31.6 million tons in the 1987-88 crop year.

The shipping industry, which depends on the grain trade, is bracing itself for a major shakeout. Industry officials say at least two major carriers operating on the St. Lawrence Seaway could go under, resulting in hundreds of layoffs among ship, dock and terminal workers.

Analysts said the board will try to meet the needs of the country’s largest customers first: the Soviet Union, China and Japan.

‘Big Dilemma’

Canada and the Soviet Union are in the third year of a five-year accord that calls for shipment of a minimum 25 million tons of grain over the period. In the 1987-88 year, the Soviets imported 3.8 million tons of wheat and another 500,000 tons of coarse grain.

“The Wheat Board has got to look after Canada’s traditional customers and meet their needs first,” said Verna Mitura, senior policy analyst for the Saskatchewan Wheat Pool, Canada’s largest farm cooperative. “I imagine it (rationing) becomes a big dilemma.”

United Grain Growers President Lorne Hehn said that while the lack of rain has reduced yields, the extreme heat will probably lead to a high-quality grain because it helps the crop ripen more quickly.

He said a high-quality product is in much demand in such countries as the Soviet Union and China because it is blended with lower quality local grain.

“While we may be short in tons we are long in quality,” Hehn told Reuters.