It’s a good year to have bad wheat, and farmers who still have feed grain left over in their bins are enjoying a welcome rally.
The Canadian Wheat Board’s most recent Pool Return Outlook bumped up prices for low grades of wheat but lowered prices for most higher protein milling wheats.
CWB market analyst Jason Newton said Canadian and U.S. farmers produced so much quality milling wheat that while global wheat prices are generally rising, values for the best grades are losing ground.
“It’s a good problem to have,” said Newton about prairie farmers’ big stocks of quality wheat.
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The board lowered its outlook for No. 1 Canada Western Red Spring wheat with 14.5 percent protein by $5 per tonne to $217, with most of the better grades reduced by about $3 per tonne.
But the outlook for lower grades improved by $3 to $4 per tonne, and feed wheat climbed a whopping $20 per tonne, to $148.
Newton said an excess of quality, high protein wheat in North America has left the feed market short.
Market analyst Brenda Tjaden Lepp of FarmLink Marketing Solutions said farmers with feed wheat should have a happy winter ahead.
“What we’re seeing now is what’s been developing for a long time, which is a coarse grains shortage,” said Tjaden Lepp. She thinks feed wheat prices could soar by another $1 per bushel by the end of January if demand for U.S. corn stays high, supporting the price of that competing feed grain.
The lower milling wheat PRO reveals both the large supply in North America and buyers’ increased ability to use lower grades. This past year, as wheat prices soared, lower grades have shown the most traction.
“The most consistent thing in the wheat market today is the narrowing of the spreads,” said Tjaden Lepp.
“Every time the wheat market rallies, everyone gets very bulled-up on spring wheat returns, but the world demand for that particular type of milling quality wheat is very, very small.
“As technology gets better, they can substitute in the mid grades a little bit easier and they’ll find ways of doing that when the futures are at five bucks.”
But Pro Market Communications analyst Errol Anderson suspects there’s another phenomenon underlying the weakening milling wheat PRO: bad marketing decisions.
“It suggests to me that they’ve been selling too much at a lower price,” said Anderson. “They may have gotten caught.”
He said it doesn’t make sense for the board to cut milling wheat prices when prices in Europe and Chicago are hitting multi-year peaks, unless too much of the crop has already been sold at prices lower than where the futures market has reached.
“It’s a warning sign that something’s not quite right,” said Anderson.
“It’s got to be disappointing to the grower to see this, when we’re seeing European prices go to fresh highs and we’re having a major rally.”
But Anderson agreed that this is going to be a great marketing season for feed wheat. If the board wants to attract feed wheat this winter, it’ll have to boost its offer.
“There’s a real dogfight coming for feed wheat,” said Anderson.
The wheat board’s durum price outlook improved with tighter supplies.
The feed and designated barley price outlook also improved, thanks to smaller than expected barley production in Australia, the United States and the European Union.
