The one percent clause

High vomitoxin levels in last year’s wheat crop have prairie growers re-reading their delivery contracts.

“When a farmer makes a call around to different elevators and such, the DON (vomitoxin) is never really discussed. It hasn’t been in the past, at least,” said Derek Falk of Snowflake, Man., who is facing discounts for rail cars of milling wheat he contracted because of its vomitoxin levels.

“We just kind of get a price on a grade, or a price on a No. 2, 13.5, or No. 2, 13, type of thing.”

Fusarium thresholds are well understood by growers, but vomitoxin levels are not always clearly communicated when growers and buyers agree on contract terms.

The contract’s specifications that Falk signed with Canadian grain handler BroadGrain call for one part per million of vomitoxin, which he said took him by surprise.

“I’m pretty sure when I called these guys last year we didn’t discuss the vomitoxin, and I didn’t pick up on it,” he said.

“I just picked up on it last week after I filled the cars. So now I find myself needing this one p.p.m.”

Dustin Williams of Souris, Man., also took a discount for wheat delivered to BroadGrain by rail after being unable to deliver wheat with less than one p.p.m. vomitoxin.

“Everyone is accepting these contracts, thinking they are just a regular No. 2 CWRS, 13.5 protein, contract with a two p.p.m. vomitoxin requirement, which is the standard trade in Canada,” Williams said.

“All grain companies trade on that spec., two p.p.m. limit.”

Doug Hilderman of BroadGrain said it’s important for growers to have a clear understanding of all contract terms when signing, but they also need to understand there is a difference between what is in the Canadian Grain Guide and what processors need for quality.

“What you have to remember is in the Canadian Grain Guide, there is no vomitoxin levels in there,” Hilderman said.

“All it mentions is fusarium, but that’s different. So you’ve got the Canadian Grain Guide referencing only fusarium. Then you’ve got the buyers, and I’m talking about the processors when I say buyer. I mean the ultimate buyer, the flour mill. They don’t care about fusarium, they care about vomitoxin.”

He said this disconnect puts everybody in an awkward position. Growers are upset because their wheat is discounted due to specifications that are not in the Canadian Grain Guide, while BroadGrain is in a jam because it is discounting growers that have good quality wheat due to the fact that it has to meet the needs of its customers.

Nothing else seems to matter once high vomitoxin levels are found, including protein levels that exceed specification.

“It doesn’t matter if there is higher protein, (we) can’t give a premium,” Hilderman said.

“Protein has its own value, separate from wheat. And when you get a year with high vomitoxin, it stresses out the plant and you get high protein levels. The protein becomes less valuable, less important. So there is a lot of wheat around that is (No. 2) red, 14.5 protein, good falling number, with acceptable levels of fusarium to meet a No. 2. But the vomitoxin is 1.5 or 1.7, and that wheat has a hard time going into a Canadian flour mill.”

Falk said the grain he delivered to BroadGrain, which didn’t meet his contract’s one p.p.m. specification, has been accepted by other grain companies as a No. 1 because it is below their two p.p.m. vomitoxin requirements.

“Why not sell it into the industry standard two p.p.m. market?” Falk said.

“Maybe because he has to deliver on his one p.p.m. contract, which begs the question, why do they even sell into that market? It’s too risky and hard to meet spec and the price isn’t much better.”

Hilderman said BroadGrain doesn’t make its own specifications — its end customers do that. The specification for milling wheat that Canada sends to Europe is 1.25 p.p.m. vomitoxin, while Canadian flour mills generally demand one p.p.m.

“One p.p.m. is not the same as 1.3. It sounds like you’re splitting hairs, but small differences are very important,” Hilderman said.

“We have sales of all different qualities: one p.p.m., two p.p.m., three p.p.m., four p.p.m. We get the cars loaded, we get the certs, and then we determine the best place to send it. There are markets for all of this wheat. There are markets for the higher vomi, there are different prices, that’s all.”

The Canadian Grain Guide provides clear guidance when disputes about grain grades occur between growers and grain buyers, but they are on their own to work out the value of off-specification deliveries when it comes to vomitoxin levels.

Without any mention of vomitoxin levels in the Canadian Grain Guide, a dispute about vomitoxin levels becomes a contractual dispute between buyer and seller on price, and it is difficult for the Canadian Grain Commission to intervene.

There are rarely discount schedules in grain contracts when it comes to vomitoxin, so the price negotiations between seller and buyer can be difficult.

When growers deliver off-specification grain to an elevator, they have a good understanding of how the grain will be treated in a negotiated process between buyer and seller.

However, this process is different for growers who contract producer cars because the grain buyer is unable to blend grain before it’s delivered to its customers.

Hilderman said discounts for wheat that doesn’t make the vomitoxin specification depend on when the grain is contracted.

“A lot of the milling wheat that was sold for shipment in harvest of 2016 was sold by the farmer a year earlier. In that situation, it’s hard to know what the exact discounts are because nobody knows the quality,” he said.

“There is no discount available. It’s not that we know it and we’re not telling you. Nobody knows it yet.”

The price spread has increased dramatically between wheat with vomitoxin levels of less than one p.p.m. and wheat with 1.5 to two p.p.m., Hilderman said.

“Even if you have the same protein, same grade, test weight, moisture is the same, the spread between the two is getting quite wide, and that is what the grower has seen,” he said.

The variability in lab test results for vomitoxin is complicating the price negotiation process for wheat that does not meet vomitoxin specifications.

Falk said he had his grain retested at different labs when the test results came back with vomitoxin levels above contract specifications, and the results for the same grain varied greatly.

“We’re talking tens of thousands of dollars are based on just the variability of these tests,” Falk said.

Williams had the same experience.

“I resubmitted my grain,” he said.

“For every time I had my sample submitted, I had a different response, within what would have made the one p.p.m. contract, and outside. And it made a big difference which testing lab.”

Hilderman said variability in results is likely because of improper sample collection and splitting of the samples before testing, rather than differences in lab procedures.

A small variance make a huge difference when the test is looking for parts per million in a small sample size.

It is crucial that farmers know how to take proper samples and use a splitter to divide them, which many farmers don’t do, Hilderman said.

“They are getting a sample and they put it in a five gallon pail and then they take that five gallon pail and they dump it into four or five ice cream pails, and then they take that ice cream pail and pour that into some sample bags,” he said.

“That’s not the approved way of collecting and splitting samples.”

The grain commission and grain testing labs such as SGS and Intertek use grain splitters that divide the sample over and over to get the most accurate splitting, Hilderman said.

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