Bigger feed wheat supplies to stay put for now

(Country Guide file photo)

CNS Canada — Adverse weather conditions over the past month, including snow in Alberta and untimely rains in many other regions of the Prairies, are expected to lead to quality downgrades in Canada’s wheat crop.

While a greater percentage of the wheat in the country will likely go to feed than normal, Canada is unlikely to be a major player in the global feed grain market as world feed supplies are also large, according to industry participants.

Just how much of the Canadian wheat crop is downgraded to feed status remains to be seen, as the harvest is still not complete. Industry estimates suggest that up to 25 per cent of the country’s spring wheat and durum crop will go to feed, which compares with the levels closer to 10 per cent seen in recent years.

“We haven’t had to deal with this type of situation (large feed wheat supplies) in some time,” said Jerry Klassen, manager of Swiss-based GAP S.A. Grains and Products in Winnipeg.

While Canada will have more feed wheat, Klassen added that the increased supplies will not be a factor in the global market.

Given the abundant world feed grain situation, “it’s hard to move feed wheat offshore right now,” he said, pointing to big U.S. corn production and a large feed wheat crop in Europe.

“Major importers have their feed grain requirements covered for the first half of the crop year… making it very hard to even sell feed wheat because there is very little demand,” said Klassen. “If we’re priced competitive in the latter half of the crop year, then we’ll see some business.”

For the first half of the crop year, “we’ll see excessive pressure on domestic feed grain prices, and it won’t be able to move offshore,” he said. The lower prices and seasonal tax issues will also keep farmer selling on the slow side in the first half of the crop year.

On the domestic front, while large domestic feed supplies will be cheap, the big U.S. corn crop is also priced competitively into southern Alberta, which will further limit early feed grain sales.

From a pricing standpoint, a larger percentage of feed wheat means that “the spread between the high quality wheat and the low quality should be expected to widen”, said analyst John DePape of Farmers Advanced Risk Management Co. (FARMCO) in Winnipeg.

“There are greater challenges to marketing different grades, but there are also opportunities in terms of blending,” he added.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

 

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