Rail service hurts price | Manitoba farmer gets $1.06 more per bushel
Farmers should be exploring opportunities to ship their wheat to the United States, says a Manitoba farm leader.
Doug Chorney, president of Keystone Agricultural Producers, sold his entire spring wheat crop last week to a major U.S. grain company for more than $6 per bushel.
He said he will net $5.75 per bu. after paying to load his 17,000 bu. of wheat onto producer cars. Ninety percent of it will be paid up front.
The best quote he had from elevator companies in the Winnipeg area where he farms was $4.69 per bu.
“That’s a heck of a difference,” said Chorney.
He will be netting an extra $18,000 for his No. 2 Canada Western Red Spring 12.5 percent protein wheat by shipping it to the United States.
“That’s a lot of money to leave on the table for farmers, so I really encourage producers to investigate these options,” said Chorney.
He believes his wheat will move on the Lake Line short-line railway in February.
Chorney said quotes for No. 1 CWRS 13.5 percent wheat at Manitoba Ag Days were $4.50 to $4.80 per bu.
“I find $5.75 pretty disappointing. I can’t imagine living with $4.50 a bushel,” he said.
“When you look at the cost of growing a crop right now, that is below the cost of production, I’m nearly sure, depending on your yield, of course.”
Chorney said his U.S. deal is proof that prices quoted at elevators in Western Canada do not reflect reality.
“You know pretty quickly there is something drastically wrong here.”
However, he doesn’t believe grain companies are to blame for that conundrum.
“I don’t think it’s that at all. This is just a clear, clear financial indicator of how much this is costing farmers when you have poor rail service,” said Chorney.
Some growers are convinced they are being gouged by the grain companies based on a comparison of prices at the West Coast versus the local elevator.
Agriculture Canada data shows west coast prices for No. 1 CWRS 13.5 percent wheat and No. 1 CWAD 13 percent durum have barely budged since Aug. 2, while the average prices for those two commodities at a collection of Saskatchewan elevators have fallen by one-third over the same time frame.
The west coast prices are asking prices rather than actual sales.
Charlie Pearson, provincial crops market analyst with Alberta Agriculture, said some farmers become irate when they see that the selling price for grain on the West Coast hasn’t moved while the inland buying price has plummeted.
However, he said the comparison is deceiving. Most of the ships at the West Coast are being filled with grain that was forward priced in the fall or early winter.
The west coast cash price mainly reflects the small amount of trade between grain terminals to top up a vessel that might be a little short of a particular type of wheat.
“There is always kind of a cash market in Vancouver that will look after that 5,000 tonnes or whatever it is,” he said.
Pearson said growers wonder how much of the basis at their local elevators reflects actual costs and how much is caused by widening grain company margins.
“There are some additional costs for sure, but I would expect there would be some additional profits in the system as well,” he said.
Errol Anderson, an analyst with ProMarket Wire, doesn’t believe grain companies are making out like bandits.
“Sure, the margins are going to be way bigger than normal but they’re going to move a lot less (grain), too,” he said.
Anderson said grain companies are paying extra storage and demurrage fees these days.
“Everybody thinks the grain companies are getting rich over this. They’re not.”
He said the unattractive basis is primarily a message to growers that grain companies don’t want their grain. That message could be around for the remainder of the crop year or even longer, he added.
Pearson also worries that the transportation problem will linger. Road bans could be in effect by late March and seeding will be underway in some areas by April, so the window for moving the significant amounts of grain stored on farms is rapidly closing.