Prices vary between elevators Specifications for wheat, durum and barley also vary because a standard grade hasn’t been determined
The prairie wheat market is still evolving and hasn’t yet advanced beyond a primitive stage, crop marketers and observers say.
“You see some disjointed wheat prices,” said Derek Squair, manager of Agri Trend Marketing.
“We’re seeing big spreads, sometimes up to 80 to 90 cents (per bushel), now about 50 cents, that you don’t see with crops like canola.… We find that a little bit odd.”
Forward prices offered during the summer for new wheat crop deliveries often contained big price spreads between elevator points.
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At the time, grain company sources said it was because companies were making commercial sales to buyers and then buying that specific amount of crop from farmers. Different sales by different companies for similar types of grain were made at different prices, and the difference was reflected at the elevator.
The company would slash its bids once it had signed up enough tonnage for a specific sale because it didn’t have any more sales to cover its exposure.
Elevators also had varying specifications for wheat, durum and barley because a standard grade hadn’t been determined.
As well, farmers needed to decide what grade or protein level they were likely to produce before signing contracts for future deliveries that didn’t usually contain discount schedules for off-spec deliveries.
Marketers and farmers hoped wheat and durum marketing would quickly evolve to become like canola or U.S. wheat, soybeans and corn, with standard specs and futures-based pricing. However, it still hasn’t happened.
Analysts say Minneapolis Grain Exchange hard red spring wheat futures offer a good, U.S. dollar-denominated market price, but many are leery of using them because prairie elevator bids often diverge widely from that price.
ICE Futures Canada’s new spring wheat and durum futures contracts exist, but barely trade. Exchange chief executive officer Brad Vannan said it’s too early to assume they won’t work. As the prairie grain market evolves, so may they.
“Our own contracts … are still in a phase where they’re trying to eke out their own space,” said Vannan.
“The market has been slow to develop and we need some time for this market to mature a bit for the full value of the Canadian contract to really show itself.”
Regardless of the problems, wheat and durum are moving well through the system.
David Reimann of Cargill said total wheat and durum movement is already 600,000 to 800,000 tonnes more than at this point last crop year, so there is not much difficulty for farmers to move grain if they want to.
Squair said many of his clients are happy to be able to sell wheat and durum more easily as an early cash flow generator now that the CWB monopoly is gone.
“It’s refreshing to have more than just canola,” said Squair. “We’re using wheat more for (early cash flow).”
