Livestock producers hope that the demise of the Canadian Wheat Board monopoly means farmers will grow more of the wheat animals like to eat.
“There’s a lot of interest in that,” said broker Errol Anderson of Pro Market Communications in Calgary, who has clients who feed cattle and clients who grow grain.
“I think we’ll see a more even breakdown (of what farmers grow for export compared to the domestic feeding market). It’s definitely going to happen.”
Farm marketing adviser John Duvenaud of Wild Oats in Winnipeg expects the same interest among farmers for higher-yielding, lower quality wheat that can be sold locally.
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“It’s a market that pays,” Duvenaud said about another attraction of the feed market to a grain grower.
“It’s right here.”
Duvenaud said the amount of switching that farmers do to feed type wheat depends on the signals sent by buyers, and right now little is happening.
Farmers will move to whatever pays the most, is easiest and has the least risk, but right now that’s still hard to assess, with grain companies still leery of aggressively signing up wheat for the new crop.
Feed grain broker Doug Chambers of Quality Grain in Calgary said the opportunity might be more limited than farmers think.
“The domestic market is a very finite market,” said Chambers.
“You can’t take the 20 million tonnes of wheat that gets exported and drop it into the domestic market. A million tonnes here or there is potentially there, but Canada still needs the export market.”
Critics of the wheat board monopoly have long argued that the CWB manipulated its price signals to farmers to encourage them to grow wheat that was easy to sell into the export and human consumption markets.
They said farmers might be better off growing high-yielding feed and ethanol type wheat that could be sold into a number of markets rather than high quality and high protein wheat.
And some have argued that the livestock renaissance that began after the ending of the Crow Benefit, which had encouraged export sales of wheat at the expense of on-prairie use, sputtered partly because the board’s focus and the grading system still favoured exporting wheat.
Chambers said the grading issue is one of the key factors that will determine whether farmers move away from high quality and high protein and instead focus on high output.
“Where will the grading standard shake out? The Canadian Grain Commission grading has been out of date for a lot of years,” said Chambers.
“It’s not what the world trades.”
Another key factor will be the price spread between high and low quality wheat. If the spread is narrow, farmers will likely move to lower qualities that provide higher yield and win on the gross output.
However, Chambers noted the same phenomenon that Anderson and Duvenaud highlighted: with few grain companies offering firm new-crop prices with established premiums and discounts, farmers aren’t going to be able to decide which way to go right now.
The companies need to develop the mechanics of the pricing in their contracts before farmers will fit themselves into the machinery.
