WINNIPEG – The Canadian grain trade is risking long-term pain for short-term gains in the U.S. market this year.
Canada is expected to export about 2.5 million tonnes of wheat to the U.S. As much as two million tonnes of that is graded Canada Feed.
The flow of feed wheat is highly visible because much of it moves by truck. What irritates local Americans is many of those trucks unload in northern state elevators for reloading onto unit trains.
Congestion and delays caused when imported grain plugs elevators is fueling pressure on the U.S. government to clamp down on Canada.
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But the Canadian wheat is going into two distinct markets in the U.S. – both of which are aberrations marketing experts doubt will be repeated.
The U.S. floods that decimated the corn crop created an unusual demand for feed grains. It just so happens the Canadian Prairies had harvested the poorest quality crop on record – complete with low protein, low test weights and weather damage.
Add to the mix a favorable exchange rate and the marketing match was made. The private trade and the Canadian Wheat Board have done a booming business this past winter. But “we don’t view it as being a sustainable market,” said Saskatchewan Wheat Pool official Keith Bruch.
Even more unusual was the pile of pseudo-feed grains, wheat primarily from southern Manitoba that was thrown into the Canada Feed grade simply because of its fusarium/vomitoxin content.
Curiously, the disease also produced wheat with some of the highest protein in North America.
In Canada, feed wheat cannot by law be sold into the milling market. On the other hand, U.S. millers don’t care what it’s called, they use anything that has the specifications they want for their grist. The difference between grading systems created a lucrative marketing opportunity.
Farmers with that high protein, heavy test weight, fusarium “feed” wheat, were offered up to $1 per bushel over the Canadian Wheat Board initial price for feed of $1.71 bushel (basis on-farm in southern Manitoba.)
They also receive any final payments from the CWB pool, currently expected to be between 35 to 60 cents per bu.
The wheat was cleaned to U.S. specification and shipped across the border to capture milling prices. Minneapolis cash wheat prices for 13 percent protein are currently around the $4 (U.S.) per bushel level.
