Prairie farmers might be crying over the slump in wheat prices since last summer but some international customers at the Canadian International Grain Institute’s summer program say 2008’s high prices were pushing buyers away from Canadian wheat.
“If those pricing levels had been sustained for some time, for sure we would have gone to start using cheaper kinds of wheat,” said Pedro Vega, marketing director of miller Moderna Alimentos of Ecuador.
“It didn’t stay that long, so we backed off (considering more non-Canadian wheat).”
That’s good news for demand for Canadian wheat, because Vega’s company, the biggest miller in Ecuador, uses about 70 percent Canadian wheat for its flour, regardless of easier access to cheaper Argentine and American wheat.
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Canada’s edge in Ecuador is the high quality and tight standards that are applied to Canadian Wheat Board grains, which the nation’s small bakers need. Ecuador’s baking industry is dominated by small bakeries that cannot easily handle quality problems.
“Since they are small, they need a good quality protein that can withstand a lot of use and abuse,” said Vega.
“Even though it’s a little bit more expensive, everyone wants it. All our competitors use it.”
Ecuadorian bakers want flour that they can bring in and run through their plant’s system without having to alter too many controls or play with blending and additives. More expensive flour is cheaper than retooling dozens of bakeries to tackle sophisticated blending.
That isn’t as big a factor in Cuba, which has a centralized system and a single-desk grain buyer that uses many sources of wheat for its flours. Alimport, the Cuban food import agency, buys wheat from several major producers and distributes it to the country’s five major millers.
Wheat from France, Germany, Poland and the United States is combined with Canadian hard red spring wheat to produce blends for the hundreds of community bakeries in the island nation.
“It allows for different pricing platforms, allowing us to bring down the price of Canadian wheat,” said Perez.
Both Perez and Vega said the 2008-09 credit crunch has made it more difficult to operate commercial grain importing businesses.
“Whenever you go out into the international market, that’s something you really have in mind,” said Perez.
“For a country like Cuba, a developing country with limited resources, it’s even harder.”
Cuban organizations face more difficulties getting credit than those in other nations because of the U.S. blockade. U.S. banks and international banks with major U.S. operations are either banned from lending to Cuba or face tough restrictions.
But Cuba’s communist economy and internal financial system have kept the country somewhat insulated from the world’s economic and financial crisis.
That isn’t true for free market Ecuador, which is an integrated part of the global economy and financial system but doesn’t have as strong a financial system as Canada’s.
“We got a reduction in our credit lines with our banks. They were much tougher on giving us credit,” said Vega.
That caused Vega’s company to shorten up the credit it provides to small bakeries by 10 to 15 days from the 30 to 60 day credit it had generally provided before the crisis.
The grain trade is a credit-intensive industry, Vega noted. His company has to finance grain purchases from the exporting country’s port. The grain takes about 18 days to arrive, then sits in inventory with the company for 45 to 60 days before going to customers, who are given a few weeks to pay for the flour.
“The whole cycle is pretty long and the volumes are very large,” said Vega.
He and Perez said they hope the credit crunch will disappear soon, because buying expensive Canadian wheat has become much more difficult in the past two years.
