By October 12, snow was already falling for the second time in two weeks and harvest was only about 80 per cent complete in the Central Alberta area.
Other that than, the fall for the most part was amazing and has allowed farmers across the Prairies to get the harvest off in record time. Harvest quality and quantity have been well above expectations.
The above average overall quality of the grains this year is certainly a nice bonus for producers and grain companies as it allows more flexibility and the opportunity for both producers and grain companies to sell a premium quality product, instead of a lower grade product that sells for less to stay competitive against other world sellers.
Strong canola crop
The canola crop this year looks to be grading 90 per cent or better as No. 1, and early oil content analysis shows that the total percentage of oil in this year’s crop is one of the highest on record at right around 45 per cent on average across the Prairies.
This is a very positive thing for farmers, grain companies and crushers. Canola futures should remain strong compared to other oilseed crops due to the fact that buyers on the other end are getting a product that will yield more oil — the primary reason they buy canola is for the healthy oil.
Grain companies should have an easier time selling canola on world markets for this same reason. I hope that means their basis levels will show some improvement over time, another way that farmers could benefit from growing such a high quality crop.
Crushers will love crushing higher-oil-content canola this year as it will help them extract more value and improve their margins. This makes them more competitive selling into the world market. Again, I hope that, as they see these improvements in their margins, their basis levels also improve so that producers can share in the benefits from this year’s high quality crop.
Making malt barley
Malt barley is a crop that is very sensitive to harvest conditions and this year’s amazing fall weather has allowed farmers to bin a bumper crop of high quality malt barley.
This no doubt makes the producer feel good and no doubt the maltsters are overjoyed that they do not have to try to make malt out of a subpar quality crop like they have had to do over the past few years. Buyers are no doubt also happy to see a quality crop which means a better end product for them as well.
What does a high quality malt crop mean to the market and, in the end, to the producer? This year’s high quality, not to mention big yielding, crop means that almost every producer who signed a production contract is going to be able to deliver on his contract.
Now the maltsters are in a bit of a situation. Every year when they sign production contracts with producers they always contract a few extra acres to help them manage the risk that harvest will not be as easy as it was this year — some or all of the barley could have quality issues. The more acres they contract, the better chance they will be able to source enough quality malt in the fall to meet their sales needs for the year.
With this year’s almost-perfect harvest weather, almost every producer who has a production contract with a maltster will have malt to deliver. Now the maltsters have to decide how much barley they need to meet sales for the year, then extrapolate that back to how much can they take on every contract, and ensure that every producer with a production contract gets to deliver an equal percentage portion of their contract.
Last week I heard from a couple of producers that were contacted by one of the major maltsters and told that they would only be taking the minimum delivery guarantee on the contract — 50 per cent of the production. Now what do you do with the rest of the barley? Thank goodness the feed market is as strong as it is right now. Holding malt quality barley in the bin is a big gamble. With feed prices where they are right now, the best risk reward option may be to sell it for feed now as opposed to holding onto it for a year or more to try to sell it as malt and then the germination drops!
What about wheat
An above average yield and higher than average quality across the Prairies is only helping to add more volume to total world production when there is still a glut of wheat available on the world markets. That won’t help prices to improve for the coming year. Now reports are saying the Russian wheat crop is a record crop so we have some big competition in the world wheat markets.
Where you may find a premium this year is in high protein wheat. The majority of protein in the wheat I have heard about is running from lows of 11 per cent to about 13 per cent, with a few pockets where it was a little hotter or drier where the protein is running above 13 per cent.
Grain companies are anxious to get their hands on the higher protein wheat and some are offering nice protein premiums for 13.5 per cent or higher and maybe even a trucking incentive to secure high protein wheat. I have heard the range of the premium that they are paying is between $0.04 and $0.06 per bushel for every tenth of a percent of protein above 13.5 per cent.
They want to secure the high protein wheat now so they know what they have to work with to blend the lower protein wheat to meet market specs. Then they can determine what kind of a discount scale to apply when they’re buying lower protein. This way they will be sure they can blend the high and low together to meet market specs and still make some money.
The majority of high quality wheat buyers (mills) are looking for a protein of 12.5 per cent, so that is the target the grain companies will be focusing on when blending wheat to ship to export sales.
So get your protein checked, shop around for the best offer and check bins regularly for heating.Tagged Barley, Brian Wittal, Canola, Cereals, commodities markets, Understanding Market Bulls and Bears, Wheat