CNS Canada — Consistent wheat pricing can still be a struggle to find across Western Canada, two years into the new open market.
A lack of consistency can make it difficult to compare pricing from one delivery point to the next, leaving farmers uncertain just how much their wheat is worth.
While one elevator may quote a price for No. 1 CWRS wheat with protein content of 13.5 per cent, a neighbouring delivery point may be using a No. 2 at 13.0 per cent protein for its base quote, and a third elevator may be factoring in the currency exchange in a different way than the other two.
“If you don’t do all of the math you risk leaving a lot of money on the table, because there is a lot of variability in the wheat basis, and there is a lot of variability in the grade spreads from one company to the next,” said Brenda Tjaden Lepp of FarmLink Marketing Solutions in Winnipeg.
“It makes comparing very difficult,” said John DePape of Farmers Advanced Risk Management Co. (Farmco) in Winnipeg. Some companies don’t put out any public prices and only make them available to customers, he added.
“As a market observer, I don’t like that. I think we need more visibility in prices,” said DePape. However, he didn’t think there would be any pressure for the grain companies to streamline their wheat pricing, as long as it was working for them.
“If it affects their business, they’ll look at changing,” he said, but he was uncertain that streamlined pricing for wheat was on the agenda for the time being.
Period of adjustment
While greater consistency in wheat pricing from one elevator to the next would make comparison shopping easier, there are other factors to consider as well.
“Different companies are selling to different markets, so let the companies decide what meets their needs, and likewise farmers can decide what meets their needs,” said Blair Rutter, executive director of the Western Canadian Wheat Growers Association. “As long as there is competition and farmers have choices, then that’s the ideal marketplace,” he added.
Regulations put in place by the Canadian Grain Commission, which put penalties in place for line companies if they don’t accept deliveries in the contracted window, do create some uniformity, he noted.
However, there is still room for improvement. Rutter said capacity on the rail lines remained a key priority, as “that is the basis of competition among the grain companies. If the rail system is plugged, we don’t see good competition among the grain handlers.”
There’s also need for greater market information on prices and exports, he said, pointing to readily available U.S. data that does not now have an equivalent in Canada.
In many other countries, Tjaden Lepp added, a farmer could “just click on a website and see where prices are at,” while the same process takes a number of phone calls in Canada.
“This is all part of the adjustment to the open market,” said Rutter, noting that after over 70 years under the Canadian Wheat Board single desk, the current market is still in a period of adjustment.
Tjaden Lepp agreed, noting such a transition will take time.
In addition to improved public reporting of export business and prices, she said a movement to using ICE Futures Canada wheat futures as the hedging mechanism of choice would also help simplify matters in terms of wheat pricing.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.