The upside to the downslide of wheat prices in the last two years is new and hungrier buyers for Canadian wheat, says a senior Cargill marketer.
Big crops and more company control of the supply chain have led Canadian wheat into markets where it previously wasn’t strong or competitive, John Buboltz told the Western Canadian Wheat Growers Association annual convention in Winnipeg Jan. 8.
For example, he said African buyers have purchased more Canadian wheat than they did during the CWB monopoly days.
“There are new customers, and it seems that we are finding new demand. Commercial firms in Canada are finding new demand, consistent demand, that’s flowing into Africa,” said Buboltz.
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He said the ability of companies like his to control origination to delivery is helping boost demand.
“You can find new markets that you can identify and work directly with those customers,” said Buboltz.
“That’s been the biggest eye-opener for us at Cargill. We can go direct to those customers instead of always working through a third party to make that happen.”
He said Canada has been successful in keeping market share in the new world reality of eight major wheat exporters, including the Black Sea exporters,as opposed to the pre-2005 situation of five major exporters. The U.S. share has declined, but Canada’s has stayed firm.
Part of that strength is a result of the Canadian system focusing more on capturing demand and moving crop rather than forcing the highest premiums possible.
“As the market becomes more free, instead of having this high price island, you’ve been able to still extract some premium, but you’ve increased the volume,” Buboltz said about recent Japanese demand.
He said the 2007-08 price spike in spring wheat prices had a lasting effect on many buyers, causing them to learn to use 13 percent protein wheat rather than 14 percent protein. Many are sticking with that percentage, even though wheat is cheaper now.
“You continue to see every miller and baker across the globe trying to do more with less,” said Buboltz.
“Thirteen pro(tein) is the common grade, from a quality standpoint, in the world,” he said.
“What is the cheapest way to get to a 13 pro?”
He said that’s true in markets from Europe to Asia to the United States.
Fortunately, Canada has learned to better market its Canada Prairie Spring and other lower-protein wheat varieties and is now finding customers in markets that formerly bought little from Canada.
Buboltz said western Canada’s varieties of wheat classes and protein levels can compete head-to-head with U.S. “grocery boat” shipments from the Pacific Northwest to South America, which contain high-protein spring wheat and lower-protein wheat in different compartments of the same vessel.
“We have that now in Canada,” said Buboltz.
“We have direct competition to that type of combo vessel out of the PNW. We didn’t have that before.”
