What do customers want when they buy Canadian wheat?
Cereals Canada and the Canadian International Grains Institute recently commissioned market research firm LMC International to answer this question.
Farmers should care about the answer because it will impact their future bottom line, and their check-off dollars may be going to go to support the industry’s response.
One of the report’s main findings is that Canadian wheat faces a significant freight disadvantage when compared with the rest of the world.
This is not a surprise. Canada does not have a Mississippi River system. We don’t have our production areas clustered within trucking distance of our ports like Australia or the Black Sea region. It is 1,700 kilometres from the middle of Saskatchewan to either the West Coast or Thunder Bay. We can’t change our geography.
We know that Canada will almost always be at a freight disadvantage and therefore a step behind in price sensitive markets. This means our wheat has to compete on more than just price.
So what do customers pay extra for? The report found that the Canadian wheat brand is known for superior protein content and quality, consistency and cleanliness (small dockage and small amount of “other” grain). This is especially true for Canadian Western Red Spring wheat and durum.
It’s good news that customers pay more for a branded product, but while our reputation as a consistent supplier is strong, it has taken a hit in recent years. Consider the transportation crisis of 2013-14. Canada simply cannot afford to see this crisis recur.
The countries where Canadian wheat is differentiated (branded) are important to a farmer’s bottom line. These include long standing customers like the United States and Japan for CWRS and North Africa for durum.
The Canadian value chain needs to take steps to ensure that we keep these customers happy.
This is another point emphasized in the new research. Current action includes steps that have resulted in a recovery of CWRS gluten strength and measures that will keep this key quality parameter at levels that good customers have come to expect.
The report also tells us that these strong traditional markets for Canadian wheat and durum are not growth opportunities. This means that if the Canadian wheat industry wants to grow, we are going to have to do more than just preserve the good customers we have today.
Growth opportunities include West Africa, South America, South Asia and the Middle East. The market research noted particular opportunities for Canada in West Africa and South America. Canadian wheat is not well differentiated in these markets, so Canada has some work to do before the growth potential can be realized.
Additional branding of Canadian wheat will happen by finding new uses for some of our traditional high-valued wheat classes. Can CWRS enhance lower protein wheat to deliver the quality of flour that West African markets de-mand? Can we better differentiate other wheat classes in new markets? For example, South America is receptive to Canadian Prairie Spring. How do we build the strong brand of consistent quality for CPS in South America as we have for CWRS in Japan?
All parts of the value chain need to work together to answer these key market development questions, and the work has already begun.
Team Canada, comprising producers, industry, Cereals Canada, CIGI and the Canadian Grain Commission, will be visiting West Africa this fall to help develop our brand through new crop missions. The answer to the question, “what do customers want?” will form the backbone of the development of strategic research objectives for the value chain.
The ultimate goal of sustainable growth for the cereals industry won’t happen overnight. Accomplishing this goal requires commitment from every part of the value chain: crop development companies, exporters and farmers. The first steps on this path have already been taken.
Cam Dahl is president of Cereals Canada.