The number one priority for farmers with feed wheat should be getting rid of it, says a grain market analyst.
They shouldn’t sit on their low quality wheat in hopes of higher prices later this year or blend it with better quality wheat next year, advises Errol Anderson of ProMarket Communications.
Instead they should take a serious look at the Canadian Wheat Board’s new guaranteed delivery contract for Canada Feed wheat.
“I like that there’s another delivery opportunity for the grower because they really do need it,” said Anderson.
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With this year’s harvest problems and the carryover from last year, there is a lot more feed wheat in the countryside than generally thought, Anderson said, so farmers waiting for a rise in local prices might be waiting a long time.
“The domestic market will be at best flat all winter.”
The feed wheat guaranteed delivery contracts will be available until Nov. 30, although the board can withdraw the offer at any time.
The guaranteed delivery contracts, which have previously been available only on feed barley, offer 100 percent delivery by a specified date. The board will begin calling the feed wheat sometime before Dec. 30, depending on market conditions.
The board decided to introduce the guaranteed delivery contract to ensure it can take advantage of nearby sales opportunities.
“We have confirmed sales for feed wheat that have to be executed over the next couple of months,” said Garry Pichlyk, the wheat board’s senior manager of farm services.
He said the board received minimal commitments under its recently completed Series A regular delivery contract so opted to use the guaranteed delivery contract to attract deliveries of feed wheat. The decision to offer a second guaranteed delivery contract will depend on future sales.
“It’s totally driven by confirmed sales,” said Pichlyk.
Farmers can use any of the board’s pricing options to price their sales under the guaranteed delivery contract.
A significant spread now exists between board and off-board prices. The CWB’s pool return outlook for feed wheat is around $65 a tonne, or $1.75 a bushel, depending on location. The domestic market is paying around $2.40 a bu. in Alberta and a bit less in Saskatchewan due to freight costs.
Pichlyk said that while the board’s price outlook isn’t great, the guaranteed delivery contract at least gives farmers an opportunity to move product off their farms and receive cash flow.
“There is a lot of lower quality out there sitting in piles and I think farmers really want to ensure they can move it before winter.”
Anderson said farmers need to be creative in dealing with their feed wheat. One idea would be to move it through the CWB contract and replace it with call options on corn.
“If it was me, especially in central Saskatchewan, I’d look to the board to take care of the problem of delivery, then replace it with corn,” he said.
Demand for corn will be extremely high because of growth in the ethanol industry and corn values should increase accordingly.
