Falling number discounts surprise producers

Some elevators are testing before they take delivery and heavily discount wheat shipments if the levels are deemed unacceptable

Poor falling numbers in the Canadian wheat crop have growers scrutinizing their sales contracts because deliveries that fail to meet minimum falling number commitments are being dumped into the feed bin regardless of what they look like.

“If farmers are observing something unusual or something they haven’t seen before, it’s advisable for them to look around to see what other grain companies in their area might be doing because not everybody is handing the falling number problem the same way,” said Wade Sobkowich, executive director of the Western Grain Elevator Association.

Todd Hames, who farms near Lloydminster, Alta., and sits on Cereals Canada’s board as producer representative from the Alberta Wheat Commission, said producers are upset their grain is being discounted so drastically.

“In my area we’ve never even discussed falling numbers in previous years. No one has ever told us that our falling number was low or high, or what it was,” Hames said.

“The falling numbers could have been quite high and they have never paid a premium for it. But now they are concerned about falling numbers so they want to discount or not accept our grain.”

John Peterson, Richardson’s vice-president of wheat merchandising and commodity hedging, said the company identified significant variability of falling numbers across the prairie wheat crop with its harvest sample program.

On a normal year, Richardson tests falling numbers within the set of tests it conducts every time it ships a train so that it knows exactly what’s moving to port.

This year, Richardson is testing falling numbers before it takes deliveries from producers.

Peterson said this is the first year the company has been so active in terms of knowing specifically what the falling number is on the grain coming into their elevators.

“What Richardson has tried to do this year is proactively manage what the falling numbers are, at various locations coming from various farmers, so that we can match up falling numbers against sales and allow the system to continue to flow, from elevator to terminal, to boat and to customer,” Peterson said.

“The only way to do that is to test farmers’ samples so that you have an idea as to what you’re getting.”

In any given year, there are usually pockets across North America of lower falling number wheat, which elevator companies manage by matching up pockets of low and high falling number wheat to meet the minimum expected levels of their customers.

But this year, because the issue is so widespread, another tool to manage falling numbers is needed to prevent the grain-handling system from backing up, Peterson said.

Compounding the problem is the large number of samples with discrepancies between their sprouting damage and falling number.

Within the Canadian Grain Commission’s grading system, falling number is not a statutory grading factor. Instead, the amount of grain sprouting is used as an indirect measure of water damage.

Peterson said Richardson has determined for this crop year that just assessing sprouting in a sample isn’t sufficient to measure how a sample would perform for its end user.

“This year what we’re finding is that something that is grading a No. 1 could have a good falling number but could also have less than a 250 falling number, in which case, it grades as a No. 1, it looks very good, but its actual functionality is quite different than what a customer is expecting,” Peterson said.

“Similarly, a No. 2, it has certain expectations. It may only be showing a certain visual sprouting activity that puts it into the No. 2 category, but its actual functionality based on the falling number is actually very poor.”

Bin Xiao Fu, a research scientist at the CGC, said counting kernels to determine sprout damage is an estimate of the damage due to access moisture, while the falling number test is a better estimate of the alpha-amylase activity in a wheat sample.

“If two kernels are sprouted, the alpha-amylase could vary greatly. One could have much more alpha-amylase than the other, but both would be counted as a sprouted kernel. That can be reflected in the falling number,” Fu said.

When grain is subjected to moisture and starts to germinate, it starts producing alpha-amylase that break down the starches in the grain.

“The falling-number test, you are basically making a slurry, a paste. If you have a higher alpha-amylase activity and most of the starch broke down, the paste will be thin, not as viscous, then the falling number will be lower,” Fu said.

“Once you break down the starch, the dough will be sticky. It will have a handling problem and its baking quality deteriorated.”

Hames said he’s not sure if his grain is being discounted twice over the same issue. For instance, it’s possible to lose a grade because of sprouting damage and then have a further discount due to a low falling number — both measures indirectly determine damage due to alpha-amylase activity.

However, he said in his contract the falling-number specification takes precedence over its grading specification.

“That’s what’s disheartening because we’ve had to agree to the visual system for years. We’ve abided to the visual grading system, and then this year because it’s not working as well for them, they’re adding in the specification system,” Hames said.

He said the sudden move by grain companies toward using falling-number tests before taking deliveries has made it more difficult for farmers to know if they’re being treated fairly, partially because it can take days to get results from a falling-number test.

“If I pull up to the driveway, most companies are probing before they’re dumping. If he probes it and says this grain is different from the last load on these visual specs, I have the choice of saying, ‘no I won’t accept that,’ and I can take it home. Or we can have a bit of a dispute resolution on the driveway,” Hames said.

“Once it’s dumped and the elevator company has thrown it into the feed bin, I’ve found the companies can be very hard to deal with.”

Under laboratory conditions, the accuracy of falling-number tests around a measured value of 300 seconds is ±30 seconds, and 30 seconds is significant on the discount schedules being used.

For instance, Hames said a company he’s dealing with starts discounting grain with a falling number below 290 and rejects grain below 250.

The CGC arbitrates grain-grading disputes between growers and buyers by providing a binding grade, but falling number is not a statutory grading factor so grain can’t be downgraded because of low falling number results.

However, contracts often have a falling number value so grain deliveries that don’t meet contract requirements can be discounted.

“These contracts, however, are between farmers and their grain elevators. At this point the CGC would not have any direct involvement,” said Rémi Gosselin of the CGC.

“It becomes a contractual dispute, and if farmers aren’t satisfied with the way they are being dealt with, what we recommend is that they consult their legal counsel.”

The CGC offers falling-number tests to producers at no charge through its harvest sample program, which farmers can use for reference.

Also, if buyers and sellers in a dispute over the falling number both agree, they can use a CGC test to achieve a binding result.

But this process is voluntary.

Last spring, the CGC circulated a discussion document about the potential of incorporating vomitoxin and falling numbers into the grading system.

“The results of that discussion have not yet been disclosed. What I can share, however, is that a significant majority of producers and grain industry representative had objections to the proposal because of its cost implications and limited benefits,” Gosselin said.

Sobkowich said the Western Grain Elevator Association doesn’t want falling numbers to be part of the grading system.

“Once it’s part of the grade, you have to assess falling number every year and all the time. And it’s not a problem every year and all the time,” Sobkowich said.

“If it’s part of the grade, it represents another way for a farmer’s grade to be downgraded. We don’t think that’s in the farmers’ interest.”

He said the scrutiny that falling numbers are under this year will be short-lived because it’s due to the unique harvest conditions.

Also, if growers happen to have wheat with high falling number for sale, they should take full advantage of it.

“Make a deal with an elevator for all of their wheat,” Sobkowich said.

“If they also have some low falling number or other commodity types, it all goes to the negotiation when talking to the elevator.”

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