making dollars and sense of classes in manitoba · making dollars and sense of wheat classes in...
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![Page 1: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013](https://reader033.vdocument.in/reader033/viewer/2022050208/5f5a977a55ad5f6039367dea/html5/thumbnails/1.jpg)
Making Dollars and Sense of Wheat Classes in Manitoba
Dan Caron,MB AgricultureMAC 2013
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Why Such an Important Topic• Need to clear up confusion on wheat and wheat classes.
• Help producer make informed decisions on which wheat variety to grow.
• Much more than yield potential needs to be considered.– Who buys it, where to deliver, segregation, etc
• How is the wheat priced? Milling, Feed, General Purpose.....grade, protein discounts.
• Need to treat 2013 as an outlier year and not use results to base all decisions for 2014.
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Wheat Acreage Trends• Western Canada traditionally been a high quality, high protein wheat supplier for world markets.
• CWB was only seller on world stage for Canadian milling wheat.
• Over the past few years, seeing a shift from growing high protein wheat to higher yielding, mid protein wheat.
• 2013 saw more non‐CWRS wheat grown than ever before in Manitoba.
• In an open, non‐CWB environment producers are looking for economical alternatives to growing high protein spring wheat.
• Revenue = Price x Yield, so if increase in yield potential more than offsets decrease in price, then it makes sense.
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Advantages• Many options for farmers.....but need to be aware of all aspects.
• Risk Management – spread out risk with different wheat classes.
• Crop Insurance – can insure each class of wheat separately to avoid averaging yields.
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Disadvantages• Pricing Confusion.
– Pricing, base grades, protein discounts, etc. Everyone different.
• Buyers not all the same in terms of how they handle classes and how they price them.
• Segregation – need to ensure all classes handled and binned separately.
• Fusarium/DON levels an unknown. Have not had high pressure and not known how varieties will fare.
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Price Comparisons Dec. 4/13 –Delivery Wpg.January 2014 September 2014
CWRS #1 13.5 Pro $5.97/bu $5.99/bu
CWRS #1 12.0 Pro $5.52/bu $5.54/bu
Winter Wheat $5.84/bu $5.93/bu
Feed $4.94/bu $4.98/bu
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Yield Comparisons (Red River Valley)
2013 2011‐13Average
2009‐13 Average
Carberry&Glenn (Spring)
65 bu 58 bu 54 bu
Falcon(Winter)
75 bu 77 bu 75 bu
Pasteur(GP)
89 bu 73 bu (only in 2012)
??
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Red Spring Wheat (CWRS)
• 77% of wheat acres in Manitoba in 2013.• Price dependent on grade and protein• Most common contracts are base #1 13.5 Pro with discounts for grade & discounts/premiums for protein.
• Most companies price RSW off of Minneapolis Grain Exchange Futures (MGEX).
• Winnipeg ICE does have RSW contract, but very thinly traded.
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Red Spring Wheat (CWRS) con’t
• Protein Spreads generally determined at time of delivery. Forward contracts can specify grade and protein different from base contract. Eg: Can sign a #2 CWRS 12.5 Pro which locks in grade and protein discount.
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Determining Protein Spreads• Historically, CWB set the protein spreads for producers.
• Now, open market activity dictates price discovery.
• Protein Speads are now a market response to supply and demand fundamentals.
• In 2013, proteins lowest in recent memory and therefore abundant market supply dictates big discounts below base grades.
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Historical CWB Spreads around a #1 CWRS 13.5 Pro
•
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Current Protein Spreads• A lot of low protein spring wheat grown in 2013 in Western Canada.
• Protein Discounts/Premiums have increased dramatically since harvest.
• Highest spreads since 2010/11• Quite variable by company, discount as high as 3.5 cents per tenth below 13.5 (.35 cents per %)
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Winter Wheat (HRW)• HRW Contracts based off of CME (formerly KCBT) futures prices in Kansas City.
• Base Grade is #2, possibly minimum protein too, maybe 11.5%.
• Good grade and protein in 2013, many winter wheat crops with protein above this year’s spring wheat.
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General Purpose Wheat (GP)• An emerging class of wheat with some flexibility in terms of end use, flour mills love it.
• Pasteur most popular variety.• Higher yield potential than RSW, but slightly lower price.
• Priced off of Kansas City, similar to Winter Wheat base #2 11.0 Protein, possibly discounted.
• For Example Currently .20 to.40 cent discount off of Winter Wheat prices delivery Wpg.
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Faller Wheat• US Hard Red Wheat Variety grown as identified preserved (IP) in MB with JRI and P&H.
• Likely continue IP in 2014 and until its registered in Canada.
• 42,000 ac grown in MB in 2013.• Must be graded as a “Feed Wheat”, but prices offered very close to RSW.
• Protein levels rated lower, could mean eventual registration as a CPS wheat.
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Crop Insurance• Offers separate coverage for each class of wheat.• Advantageous for producers, reduces adverse affects of averaging yields across all fields for determining claims.
• Also offers grade guarantees for each class which may make a big difference in years of poor quality, high fusarium levels, etc.
• Feed Wheat Premiums higher and less coverage due to higher claims history.
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Crop Insurance con’t• MASC offers separate coverages for:
– Red Spring Wheat (Carberry)– Winter Wheat (Falcon)– Feed Wheat (Pasteur, Faller)
• Also offers separate coverage for:– Hard White Wheat (Snowbird)– Prairie Spring Wheat– Extra Strong Wheat– Durum
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2014 Operating Costs ‐Spring Wheat vs. Winter Wheat vs. GP
Spring Wheat Winter Wheat GP Wheat
Seed & Treatment $21.50 $25.50 $20.00Fertilizer $58.33 $70.65 $70.65Herbicide $23.32 $7.90 $23.32Fungicide $21.40 $21.40 $21.40Fuel $20.73 $23.08 $23.50Machinery Operating $10.00 $8.00 $10.00Crop Insurance $17.27 $18.96 $22.19Other Costs $7.75 $7.75 $7.75Land Taxes $4.50 $4.50 $4.50Interest on Operating $5.08 $4.96 $5.59Total Operating $192.21 $195.06 $211.13
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2013 Average Margins (Over Operating) Spring Wheat (Carberry)
Winter Wheat (Falcon)
GP Wheat(Pasteur)
Avg. Yield (bu/ac)
65 75 89
Price/bu 6.50 6.25 6.00Gross Revenue 422.50 468.75 534.002013 Operating Costs
206.44 194.19 215.00
Margin (overOperating)
$216.06 $274.56 $319.00
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2014 Projected Margins Spring Wheat Winter Wheat GP Wheat
Average Yield 52 bu 72 bu 68 buPrice (fall 2014) $5.99 $5.93 $5.50Gross Revenue 211.48 426.96 374.002014 OperatingCosts
189.88 195.06 211.13
Margin (over operating)
$121.60 $231.90 $162.87
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Takeaways• Wheat just isn’t wheat anymore. Need to understand all aspects of each class to determine best fit for producers.
• Yield potential, delivery points, contract specifications, price, premiums/discounts, Crop Insurance all factors to consider.
• Good opportunities for Manitoba producers, but need to spend time to understand it.
• Grow winter wheat this year!!!