Price differentials between Canadian, U.S. elevators are starting to narrow
The declining value of the Canadian dollar is providing attractive marketing opportunities for western Canadian farmers who don’t mind trucking their grain across the U.S. border.
The Canadian dollar has traded between US94 cents and 78 cents in the past 12 months, with some brokers offering rates as low as 75 cents.
That exchange rate has a lot of growers looking south for marketing opportunities.
Canadian grain companies have been gradually closing the price gap by adjusting cash bids at Canadian elevator locations close to the border. However, farmers who truck grain south can still cash in on attractive price premiums based on exchange rates.
Landon Friesen, a grain grower from southern Manitoba, said he will truck almost 9,000 tonnes of grain and oilseeds to nearby U.S. locations in 2014-15.
“It’s been a very good experience for us,” said Friesen.
“I know the paperwork can seem overwhelming at first, but once you’re set up … you’re good to go.”
Friesen’s farm is near Crystal, City, which is 15 kilometres north of the U.S. border.
His family has been hauling hay to the United States for years so they were accustomed to transporting bulk commodities across the international border long before it became legal to sell Canadian wheat in the U.S.
With current exchange rates, Friesen estimated as much as 85 percent of his production will be delivered to U.S. elevators this year.
“(The U.S. dollar) is so strong right now, and if we can get paid in U.S. funds and play the currency game, we’re way ahead. Even if they’re paying the same amount but in U.S. dollars, that’s 25 percent more because for us, it’s the same distance to go to some of these North Dakota elevators as it is for us to go to some of our Manitoba elevators.”
However, Friesen said differentials in cash bids between Canadian and American elevators are beginning to narrow.
Ron Brunel of Ste Rose, Man., 300 kilometres from the U.S. border, agreed.
“What we have seen in the past 12 months is that basis levels have changed … so it’s not as attractive to do this as it was, say, a year ago.”
He said the advantages of marketing in the United States are not entirely based on price.
Delivery opportunities are often more predictable at U.S. locations, especially for crops such as soybeans, which are still competing for capacity at many Canadian elevators. Brunel said he will move 45 loads of soybeans this year to North Dakota elevators at Gilby, Crystal and Park City.
A round trip can sometimes cover 900 kilometres.
Brunel sells through a broker and receives payments in Canadian dollars, but the broker also pays for Brunel’s trucking at competitive commercial rates.
The necessary paperwork is printed before Brunel leaves home and is presented at the border crossing, which takes just a few minutes.
“It’s no more complicated than if you or I were crossing the border to go shopping.”
Tyler Bjornson, president of the Canada Grains Council, said his organization has been working with U.S. groups to ensure that grain is moving freely across the border in both directions.
The council and relevant U.S. groups have compiled information at Canada-usgrainandseedtrade.info aimed at helping farmers move their products across the border.
Bjornson said regulations need to be modernized to ensure U.S. wheat that is marketed in Canada is graded fairly.
Provisions contained in Bill C-48 would help address these concerns, but it is unclear if the bill will be passed before the next federal election, scheduled for October.