CALGARY – The market for high quality wheat is a “niche market” and Canada would be well advised to start focusing on growing and selling more lower quality wheat, says the president of Cargill Ltd.
Kerry Hawkins told the annual convention of the Western Canadian Wheat Growers Association that changing consumer tastes and competitive forces are reducing the demand for the high quality, high protein wheat that Canada is famous for.
“There is a limited market for high quality out there,” he said. “The world wants good quality, and we need to produce what the consumer wants.”
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In an interview after his speech, Hawkins said the Canadian production and marketing systems place too much emphasis on high quality.
Consumer tastes are changing and the range of wheat-based products is much greater than it was just 10 years ago.
People no longer want to buy high protein wheat and make white bread. Instead they are consuming a wide variety of flour products, like tortillas and flatbreads, that can be produced from lower quality.
As a result, said Hawkins, demand for the highest quality wheat is dwindling.
“The world wants some, but it doesn’t want all that we grow.”
He said Canada sometimes has to sell above contract specifications because all it has available is high protein, high quality wheat, even if that’s not what the customer wants.
The wheat industry needs to work with plant breeders to ensure they are developing wheat that the market wants, Hawkins said. That means less emphasis on yields and input traits and more emphasis on the end use.
“This is not about us (Cargill) getting a bigger piece of the pie,” he said. “This is about creating incentives to allow Canada to maintain our share of the market.”
A Canadian Wheat Board official attending the convention said the board is well aware of the need to produce what the customer wants, and is involved in projects that do that, such as the arrangement to ship identity preserved wheat of specific varieties and quality specifications to Warburton’s, a British flour milling company.
“We sat down with them and we’re providing them precisely what they want,” Earl Geddes said.
He acknowledged that dietary tastes are constantly changing and Canada’s wheat industry has to be responsive.
But he said Canada Western Red Spring-type protein continues to fetch a “tidy premium” in all markets against all competing wheats.
Growing lower quality, lower priced wheats wouldn’t pay off for most growers in Western Canada, given the handling and transportation costs.
“Our problem is that to compete with U.S. hard red winter ordinary or Black Sea wheat from the centre of North America is not very profitable for a lot of farmers,” Geddes said. “So finding higher premium value-added wheat is where the focus has to be.”
In a typical year, production of Canada Western red spring wheat totals 17 million tonnes, while world demand is usually 12 million tonnes.
Geddes said that’s why the board has been working with plant breeders and others in the industry to improve and expand the Canada Prairie Spring Red class with new varieties like AC Crystal.
AC Crystal has a medium level of wheat protein with better strength and processing characteristics than previous CPSR varieties. It has similar milling and baking characteristics to U.S. hard red winter wheat of the same protein level.
