Free market, but little grain heading to U.S.

U.S. loses luster | Feedlots, grain companies and marketers are offering good prices so there is no incentive to haul south

Visitors to the United States who are worried about big lineups of grain trucks clogging the border crossings can relax.

There are no reports of significant grain truck movement of prairie farmers’ wheat, barley or durum into the U.S. now, and most observers and analysts don’t expect to see much.

“It’s a bit of an eye-opener to some of how the free market actually works,” said Doug Chambers of Quality Grain. “The feed market of Western Canada is aggressively holding onto grain.”

John Ulrickson of the Money Farm, a grain marketing service in Fargo, North Dakota, put it simply.

“Nothing’s really moving across.”

For decades, many farmers have wondered if the tales they have heard of fat U.S. grain elevator prices would cause a flood of trucks into the U.S. if the CWB monopoly was ever broken.

The monopoly’s gone and those better prices don’t appear to exist.

Analysts say that’s partly because feedlots, grain companies and other marketers are offering good prairie-based prices, which gives farmers no incentive to haul to the U.S.

Another reason is that the high U.S. prices that played such a big role in CWB monopoly debate were mostly a myth.

Some of those prices were for small amounts of tightly specified grains, with big discounts for anything not hitting the spec. Others were just for tiny amounts of grain to fill out the last couple of cars on a train.

Chambers said he has seen a number of the latter situation since the border opened up, and as he expected they’re there and gone in the blink of an eye.

“It’s really spot situations, and if you don’t grab them they’re gone,” said Chambers.

For instance, a farmer he knows in Leader, Sask., had a U.S. offer for feed wheat for $7.25 per bushel picked up at his farm. He waited two days to accept the offer, by which time the basis had fallen by 60 cents and the price was no longer better than local prices.

Generally, U.S. prices don’t look good once transport costs are added to the elevator price.

Keystone Agricultural Producers president Doug Chorney said Canadian grain companies appear to be offering market-reflective prices, so even slightly better prices at some locations at some times in the U.S. don’t add up to more profit.

“They’re not enough to drive 150, 200 miles to get,” said Chorney, who has called a number of U.S. elevators to see what they’re bidding.

Chambers said Alberta grain companies and feedlots want the grain as much as U.S. buyers, so U.S. buyers have generally found they can’t make the numbers work to close deals.

One U.S. buyer asked Chambers about a potential purchase, which Chambers thought he could arrange. Then a couple of days later the buyer said he could afford to buy the grain for only $17 per tonne less than he previously suggested.

“I said, ‘well, no, you can’t make it work at $17 less because it will stay in the Alberta feed market,’ ” said Chambers.

The lack of big deals in the U.S. is no surprise to most analysts, economists and brokers. Overall prices weren’t likely far out of alignment even when the wheat board monopoly was in place, although there could be short- and medium-term aberrations because of the long-lived nature of CWB pool pricing.

North Dakota Wheat Commission marketing director Jim Peterson said he has seen little sign of much extra Canadian grain moving south, and doubts there will be.

“There’s a pretty good incentive for your elevators there on your side to keep the grain there,” said Peterson.

“We’re not hearing that there’s much moving.”

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