Canada’s wheat market isn’t necessarily in trouble, says a senior Canadian grain company executive.
New crop wheat contracting is sluggish and the use of ICE Futures Canada’s spring wheat and durum contracts is negligible, but Keith Bruch, vice-president of operations at Paterson GlobalFoods, said it’s more a reflection of commercial conditions that are on the verge of changing.
“It’s been relatively quiet,” Bruch said.
“We’ve got buyers who are bearish and waiting for the crop to develop and values to develop.”
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Bruch said most overseas wheat and durum buyers purchase only two to three months before they need supplies to arrive, so most commercial activity has been with old crop supplies.
New Japanese wheat tenders will soon be announced, which will begin the real new crop commercial marketing year.
“That’s when we’ll see the true open market start to trade,” said Bruch.
Canadian grain companies generally haven’t been taking long or short positions on new crop wheat, so they have not been aggressively buying or selling wheat without making matching buys or sells on the other side. Wheat values are twitchy and no one wants to be overexposed.
“The market’s very volatile. The protein values are very volatile. The spreads are volatile. So there’s considerable risk with taking sizeable positions,” said Bruch.
Farmers are also antsy about locking in prices in new crop wheat and durum contracts when there are still many unanswered questions about the future of prairie grain marketing.
“We have producers who are waiting for some clarity as to the crop size and quality, on grade spread values,” Bruch said.
“Also, I think everybody is waiting for arrangements between grain companies and the wheat board on pool deliveries.”
As well, the lack of trading in ICE Futures Canada’s new spring wheat and durum contracts isn’t necessarily a sign that they won’t work. Without commercial activity to hedge, the basis for most trading hasn’t existed.
“There hasn’t been a huge amount of action anywhere on the Canadian cash side. It’s only a small part of the Canadian crop that’s been traded, so there’s still time,” said Bruch.
