Premiums dip with supply of high protein wheat

Too much of a good thing | Hot, dry weather has boosted protein levels in many areas so modest premiums are expected

Prairie grain growers are still waiting for clear signals on whether grain companies will offer premiums this year for high protein wheat.

Although the western Canadian wheat harvest is still in its early stages, initial reports suggest that North America will produce abundant supplies of high protein milling wheat this year.

The Canadian Grain Commission reported last week that protein levels in Western Canada’s red spring wheat crop were averaging 14.1 percent as of Sept. 10.

That preliminary figure was based on 700 samples submitted through the commission’s annual harvest sample program, most of them from Manitoba.

With abundant supplies of high protein material expected, farmers and industry analysts are anticipating modest protein premiums at best.

“As far as I know, there aren’t a lot of premiums for protein,” said Manitoba grain grower Chuck Fossay.

“There’s just so much (high protein wheat) … out there in Western Canada and I think the U.S. wheat crop had quite good protein as well, so there’s not a lot of premiums being offered.”

Hot, dry weather across much of North America this summer boosted protein levels in spring wheat crops and reduced the demand for high protein grain among North American buyers, said Errol Anderson, a grain market analyst with ProMarket Wire.

“The heat has definitely cranked up (protein levels), and it’s given the market ample supplies,” he said.

“The last I (heard) … is that there really isn’t anything being offered above 13.5 percent.”

In Western Canada, uncertainty surrounding protein premiums is compounded this year by the fact that the CWB is no longer the sole marketer of spring wheat.

As it has in the past, CWB is offering premiums based on a graduated protein scale that caps out at 14.5 percent.

“We will be paying on tenths (of a percent) so that’s the same as we’ve done for a long time,” said Gord Flaten, CWB’s vice-president of grain procurement.

“There is a bit of variety out there, I think, in terms of how different companies are handling it.… I think there are a lot that are paying on halves and there are many where the protein is capping out at a lower level.”

The CWB’s protein premiums are significantly lower this year than they were in 2011-12.

Effective Aug. 1, the spread in initial prices between No. 1 CWRS 12.5 percent protein and No. 1 CWRS 14.5 percent protein was 39 cents per bushel, or roughly two cents per tenth.

A year earlier, the price differential was 78 cents, or nearly four cents per tenth.

Flaten said lower CWB premiums are a function of North American market conditions in 2012-13.

“Its just a supply and demand thing,” he said.

“You’ll see that in the market this year, and the pool payments are going to reflect that market.”

Calls to other Canadian grain companies were not returned before the Sept. 10 publication deadline.

In southern Alberta, grain grower Stephen Vandervalk said producers are still waiting to see how protein premiums shake out.

“Right now, it’s up in the air,” he said. “From what I understand, some markets are going to discount you for anything under 13.5 and (those discounts could be bigger) than premiums for anything over 13.5.”

Vandervalk said growers should compare markets, inquire about local blending opportunities and ask individual grain buyers specifically what range of protein they are looking for.

Rolf Penner, a Manitoba grain grower and director with the Western Canadian Wheat Growers Association, said market conditions could change.

“It sounds like there’s an ample supply of high protein wheat out there … but I’m also wondering too if it’s a little bit early yet,” he said.

“In Saskatchewan, they’re just getting going and maybe once we get a little bit better idea of what we’ve got across Western Canada, that premium might increase.”

Although Manitoba’s protein numbers are expected to be higher than average, the province’s share of Western Canada’s total spring wheat acreage is relatively small.

According to Statistics Canada, Manitoba growers planted 2.4 million acres of spring wheat this year, or 15 percent of total prairie acreage.

By comparison, spring wheat plantings in Saskatchewan and Alberta were estimated at 8.5 million acres and 5.8 million acres, respectively.

Protein premiums in North Dakota have been highly variable over the past 18 months, said one U.S. grain buyer who requested that his name not be published.

“In the last year and a half, we’ve seen it as high as 45 cents for each quarter of a percent up and down (from 14), and we’ve swung all the way from that to where we are today, which is zero,” he said.

“Right now, there’s so much high protein around that buyers just don’t care. Wheat is wheat and it doesn’t matter if it’s 17 percent (or) 12 percent.… That’ll change as harvest progresses and things settle down…. Right now, they just don’t need it, so they’re just not paying for it.”

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