It pays to shop around when marketing feed, even midgrade wheat as the end of the crop year approaches, because the domestic feed market is paying strong prices.
If wheat is graded as feed at the local elevator, think twice before accepting the first offer for the truckload, says Brenda Tjaden-Lepp, a Winnipeg market analyst.
“If it ends up as CW feed, what a lot of people might do at that point is say, ‘OK. I’m just going to get your feed price then,’ because every elevator has a posted domestic wheat price, and that could be as low as $4.80 to $5 a bushel” said Tjaden-Lepp of FarmLink Marketing Solutions.
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However, farmers shouldn’t simply take that price as a default, she added, because grain brokers might be willing to pay more for that same truckload of wheat.
“There are brokers right now, that we’re dealing with, that are picking it up at $7.50 (per bu.),” she said.
“You could be leaving a lot of money on the table by not exploring all the options.”
According to data collected by FarmLink’s marketing advisers in Saskatchewan, most bids for feed wheat in the province range from $4.80 to $6.80 per bu., with some buyers paying up to $7.50.
Based on FarmLink’s calculations, $7.50 per bu. for domestic feed wheat is higher than the Canadian Wheat Board’s price for mid-grade wheat.
As an example, the CWB’s 2007-08 Pool Return Outlook for No. 1 CPS red is $339 per tonne in Vancouver. Deducting $65 per tonne, which is typical for a producer in Saskatchewan, equates to a price of $274 per tonne, or $7.45 per bu.
No. 1 CW winter wheat, as another example, has a PRO of $330 per tonne, which after a $65 discount would be priced at $7.22 per bu, or less than current top bids for domestic feed wheat.
Tjaden-Lepp added that feed wheat prices could be even higher in Manitoba and Alberta because of greater demand in those provinces.
Asked what is behind the high bids for feed wheat, Tjaden-Lepp speculated that ethanol demand might be partly responsible.
“Feed wheat has this new and big alternative home in the ethanol market,” she said. “So as the price of corn goes higher, the price of feed wheat goes higher, because those two become substitutes,” at the ethanol plant.
A spokesperson for an ethanol plant on the Prairies, however, said it’s more a case that world demand is causing everyone to pay more for wheat, including ethanol plants. The plants have to compete with other buyers like the CWB.
“The wheat board had a tremendous price (last year) for the winter wheat, and a lot of the growers were locked up with the board. So it disappeared on us and we couldn’t pick it up,” he said. “So we turned to corn.”
Wheat board spokesperson John Lyons said the amount of wheat available for the feed market is primarily a function of crop quality in a given year.
For example, in the 2007-08 crop year the percentage of wheat that met the highest grades was above average, he said.
