Farmers hold back on cereal deliveries

CWB harvest pool closes | Producers holding onto most of this year’s crop as they decide where to market their grain

Farmers are holding back most of this year’s cereal crop as they feel their way through the newly deregulated wheat market.

The CWB estimates producers are holding onto 65 to 80 percent of this year’s wheat and durum crops.

The agency warns that if this goes on for too long, the backlog of undelivered wheat could result in limited delivery opportunities later in the year, rising basis levels and logistical bottlenecks.

CWB made the comments Nov. 8, a day before the Nov. 9 sign-up deadline for its harvest pool, the largest of two CWB pools.

“I think if you talk to most people in the industry, there’s probably still about 65 to 80 percent of the crop out there that hasn’t been committed yet by farmers to either a pool contract or a cash contract, so there are a lot of decisions still to be made by farmers,” said Gord Flaten, CWB vice-president of grain procurement.

“If farmers wait until spring, there may be situations where they may not see delivery opportunities then, or they may see the basis on cash contracts become quite expensive.”

Flaten told members of the Inland Terminals Association of Canada last week that CWB officials were happy with the amount of grain committed to the pools.

“We are satisfied with our market share to date,” he said.

“However, given the environment that we’re in, we do want to procure more tonnes.”

Flaten said the CWB would shift gears after the Nov. 9 deadline and focus efforts on securing more grain through the cash market.

However, he did not rule out the possibility of the CWB launching another pool later in the year.

“As far as additional pools for the rest of the year, we have an open mind on that right now,” Flaten said.

Prairie grain growers are taking a cautious approach to marketing wheat.

Several issues have convinced them to delay wheat marketing decisions, including unfamiliarity with the new market, uncertainty over basis levels and the potential for rallies in the futures markets.

There were new signals last week from Australia, the world’s second largest wheat exporter, that the wheat harvest is likely to be smaller and have less protein than initially expected.

Western Australia’s largest grain handler, CBH Group, told Reuters that state-wide wheat production was likely 5.5 million to 6.3 million tonnes, well below the record 11.7 million tonnes harvested last year.

And in the eastern states of New South Wales and Queensland, industry insiders said protein levels in prime milling wheat are expected to fall below the normal 13 to 14 percent.

In its latest forecast issued in September, the Australian government pegged the wheat crop at 22.5 million tonnes, but a recent Reuters poll of analysts and traders put it at 21 million.

In Saskatchewan, there were more sales of non-board crops such as peas and canola off the combine, at least in some areas.

Jason Skinner, chief executive officer of North West Terminal, said sales programs in the Unity, Sask., area were heavily weighted toward peas and canola in September and October.

“Even up to this point, we’ve seen a lot of hesitation from farmers to commit their wheat because they’re still trying to understand the new system, the pricing, the pool versus the cash prices at the elevator, and so on,” Skinner said.

“Farmers are getting a bit more comfortable with the system now, but at the same time, we’re seeing a bit of a rise in the markets and anytime you get that situation, farmers are not necessarily in as much of a hurry to market their wheat.”

Skinner said farmers with high protein wheat were more inclined to sell into CWB pools because they offered protein premiums that weren’t offered in cash markets.

“I think pool prices have maybe been a bit more attractive when you’re looking at high protein grain,” he said.

“A lot of the lower protein grain seems to be getting sold onto cash markets, and again, that’s because there isn’t as much of a premium … for that commodity.”

However, not all signals point to slow wheat sales.

Last week, Commodity News Service Canada reported that western Canadian farmers were selling aggressively into cash markets.

A CNS article quoted Winnipeg grain analyst Jon Driedger assessing the situation.

“Without the wheat board, farmers aren’t limited in terms of delivery calls …,” Driedger told CNS.

“So in some cases farmers have been taking advantage of that flexibility and have been delivering into the system quite heavily.”

Canadian Grain Commission statistics show wheat and durum deliveries to western Canadian primary elevators are ahead of last year’s pace.

About 4.3 million tonnes of wheat were delivered to primary elevators between Aug. 1 and Nov. 4, up from 3.5 million tonnes during the same period last year.

Durum deliveries were also up at 1.09 million tonnes this year compared to 1.03 million tonnes in 2011.

Total wheat deliveries to port terminals, including durum and non-durum varieties, were listed at 5.78 million tonnes during the first 14 weeks of the 2012-13 crop year versus 4.95 million tonnes last year.

Prairie grain shipments are normally slow after Christmas because train movement becomes less predictable and winter weather hinders transportation efficiency.

About the author

Comments

explore

Stories from our other publications