Rye looking cheap compared to feed wheat, gains likely

Rising feed wheat prices in Western Canada should eventually pull more rye into the feed sector, but the higher-than-normal quality of rye sitting in farmers’ bins might make them reluctant sellers when the time comes.

"If wheat prices continue to rise, I think there will definitely be some (livestock) rations turning to more rye," said Roger Kissick, of Linear Grain at Carman, Man., adding that the lack of demand on the feed side has been a little surprising given the current price spread between the two crops.

However, the quality of this year’s western Canadian rye crop was very good, which means there is less interest amongst producers to sell it for feed purposes unless it hits a certain value, Kissick added.

Spot bids for rye in Manitoba are currently around the $6 per bushel level, while feed wheat is typically going above $7 per bushel, he said.

While feed wheat typically trades at a premium to feed rye, that spread is getting on the wide side, he said.

Farmers may be holding out for higher prices from the milling sector, but those end-users are filled for the time being, said Kissick. There might be a premium of 25 to 50 cents per bushel for milling quality rye in the current market, which means any strength on the feed side could easily pull some product that way, he said.

"It doesn’t matter to the grower what it’s used for, as long as they get the price they want," he said.

Looking ahead to 2013, next year’s rye crop is already in the ground. Dry conditions in the fall did cause rye to struggle in some areas, and it will now be a matter of waiting to see how the crop survives the winter.

Rye does typically tend to be hardier than winter wheat, and the crop also needs less moisture to germinate, Kissick said.

Statistics Canada currently estimates 285,000 acres were seeded to rye this fall for harvest in 2013, which compares with 345,000 the previous year.

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

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