MARKETS CONTINUED FROM PREVIOUS PAGE
Cam Dahl, a former Canadian Grain Commission commissioner, said a post-monopoly grain system will see farmers contracted to grow specialized wheat. “I think you’re going to see more contracts like the Warburton’s contract, where you have specific mills and buyers in other countries ‌ contracting for specific varieties,â€? said Dahl. Wheat marketing could become more complex and variety specific, which is not common now.
BARRY SENFT INDUSTRY EXPERT
Barry Senft, a former Canadian International Grains Institute head and former vice-president of Saskatchewan Wheat Pool, said buyers and processors will have the biggest impact on what grain companies choose to buy from farmers. “Canada will be tailoring the wheat to fit that particular customer,� said Senft. “It depends what the customer wants.� The CWB is now required to move all the non-feed wheat that farmers produce. It tries to encourage them to grow types of wheat that buyers want and will pay for, but has to market the grain regardless. However, after the monopoly disappears, no one will be forced to move wheat types or grades for which there isn’t a strong demand or can’t be moved easily. Tyrchniewicz said farmers will need to check with grain companies and marketers about what buyers want them to produce. He also said grain companies will push for the grain commission to drop micro-divisions of quality because they add little value but add much complexity to grain storage and handling. Many farmers prefer multiple wheat divisions because it allows the CWB to obtain premiums for providing buyers with specialized products, but others wish wheat was less onerous to store, market and move. Regardless of what farmers want, Tyrchniewicz thinks grain companies will push hard to make wheat less of a drag on their systems. Other commodities move with far greater efficiency and less cost. “Other grain grading systems in wheat are much, much less complicated,� said Tyrchniewicz. “I think it can be simplified. If other countries can simplify it, why can’t we?�
THE WESTERN PRODUCER | WWW.PRODUCER.COM | OCTOBER 27, 2011
7
MARKETING | FUTURE
Grain companies get contracts ready Forward contracts | Richardson hopes for level playing field with voluntary board BY BRIAN CROSS SASKATOON NEWSROOM
Major grain companies operating in Western Canada’s new marketing environment say they will waste no time rolling out forward contracting opportunities for producers. Executives with the companies, including Viterra and Richardson International, said they will begin offering forward contracts on wheat, durum and non-feed barley as soon as legislation ending the Canadian Wheat Board’s marketing monopoly receives parliamentary approval. Federal agriculture minister Gerry Ritz has said the majority Conservative government will ensure that legislation is passed before Jan. 1. If that happens, grain company contracts for the delivery of board grain after Aug. 1, 2012, could be unveiled later this year or early next. “That should be immediate from Viterra’s perspective,� said Fran Malecha, the company’s chief operating officer for grain. “I think we will be able to give farmers price signals for Aug. 1 and forward as soon as possible. We’re kind
FRAN MALECHA VITERRA
of targeting Jan. 1 of the New Year; that’s assuming that legislation is passed in late December.â€? Malecha said legislation would allow Viterra to use its assets more efficiently and free up capacity. “I think we see this as an opportunity to move to the next level of efficiency in moving grain from farmer to end user. We all know that there are times when capacity is constrained ‌ so the more efficiently we can use that capacity, the better for the whole industryâ€? he said. Jean Marc Ruest, vice-president of Richardson International, offered similar views, saying his company will begin offering contracts for Aug. 1 delivery as soon as legislation receives royal assent. “This path forward has been made quite clear by the government for
some period of time now so we’ve taken the steps required to at least start preparing for that eventuality,â€? he said. Eliminating single-desk selling enables grain companies to manage their facilities more efficiently, leading to better service for farmers and end users, he said. He was surprised the legislation offers government guarantees to a voluntary wheat board for five years. Richardson anticipated it would offer concessions during the transition period, but the five-year term is longer than expected. The fact that the voluntary board will be free to deal in both board and non-board crops such as canola compounds those concerns. “We don’t fear competition from anyone and in fact we’ve welcomed it on the non-board side of things ‌ but we need to understand or be reassured that ‌ we’ll be competing against them on an equal footing in a commercial environment and that we won’t be competing at a disadvantage to this entity,â€? Ruest said. Independent grain broker Allan Johnston of Welwyn, Sask., called the
proposed legislation a welcome change that will attract more investment in Western Canada’s grain handling, milling and processing. “I was just delighted to hear it was happening finally,� Johnston said. If legislation is passed, Johnston predicted there will be a learning curve as farmers become accustomed to the new marketing environment. “Within six to 12 months, they’ll see it’s not going to be any different than marketing your canola, or your flax, or your oats, or your peas, or anything else,� he said. Johnston believes the changes will generate more business for his company. He has already been in touch with at least one large American grain broker seeking top quality wheat. “We will almost certainly grow with this opportunity, but that’s not the reason I’m supporting (the changes),� he said. “I just don’t think it (maintaining the single desk) is the right thing to do.� He said he has no qualms about the voluntary board or with Ottawa offering financial guarantees. access=subscriber section=markets,none,none
WHEAT | PROTEIN
Protein an issue in Australia’s large wheat crop BY SEAN PRATT SASKATOON NEWSROOM
Australia’s early harvest returns suggest high protein wheat could be in short supply in that country. PentAG Nidera Pty Ltd., an Australian grain marketer, said in a recent weekly market report that protein levels in the crop coming off in central and southwestern Queensland have typically been below 12 percent. A lot of the crop only graded Australian Standard White at 10 percent protein, it added. “Clearly the market is becoming increasingly concerned over disappointing early har vest quality results,� said the company. A poor finish to the growing season in northern and central New South Wales and forecasts for more rain in coming weeks in those areas is adding to concerns, PentAG said in its Oct. 19 report.
Bruce Burnett, director of weather and market analysis with the Canadian Wheat Board, has heard similar reports from Australia. “For us it is reasonably good news. It does reduce the supply of higher protein wheat the Australians will have to sell in the upcoming year.� Most of Australia’s quality wheat is produced in Queensland and northern New South Wales. That part of the country is expected to produce a high-yielding wheat crop because of good rainfall during the growing season, but low protein levels often accompany high yields. “We’re hearing that there isn’t an awful lot of 13 percent Aussie wheat,� said Burnett. He cautioned that Australia is still in the early stages of a harvest that will last close to six weeks. Signs point to a near record size Australian crop of close to 21 million tonnes. A poor quality Australian wheat
crop would help offset an exceptionally high protein U.S. crop. The average protein content for the 2011 U.S. hard red spring crop is 14.6 percent compared to 13.7 percent last year and a five-year average of 14.2 percent. Global protein premiums collapsed in the wake of the U.S. winter wheat harvest. Burnett doesn’t think a poor quality Australian crop would lead to a recovery in premiums, but it would make it easier to sell high protein Canadian spring wheat. However, there is a limited supply of that type of wheat this year. The average protein content in this year’s Canada Western Red Spring wheat crop is 13.2 percent, compared to the long-term average of 13.5 to 13.6 percent. Wheat markets will closely watch the Australian harvest to see if growers are in for a repeat of 2010, when late-season rain spoiled the quality
of a great-looking crop. Forecasters say La Nina is making a return, which usually means more wet weather is in store for Australia. “Everybody is a little on edge,� said Burnett. “We’ll have to monitor the weather pretty closely to see whether Australia has big wet weather problems with their crop.� Drew Lerner, president of World Weather Inc., doesn’t expect conditions to be too soggy in eastern Australia. “I’m not thinking we’re going to have a huge problem, but we will have some of the late crop that will experience some more wet weather,� he said. Harvest weather looks pretty good for the next couple of weeks, but after that Queensland and New South Wales could become wetter. “There will be some more quality issues but definitely not a widespread serious problem,� said Lerner. access=subscriber section=markets,none,none
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