23
Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

  • Upload
    others

  • View
    1

  • Download
    0

Embed Size (px)

Citation preview

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

Making Dollars and Sense of Wheat Classes in Manitoba

Dan Caron,MB AgricultureMAC 2013

Page 2: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013
Page 3: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

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.

Page 4: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

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.

Page 5: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

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.

Page 6: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

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.

Page 7: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

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

Page 8: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

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)

??

Page 9: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

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.

Page 10: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

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.

Page 11: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

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.  

Page 12: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

Historical CWB Spreads around a #1 CWRS 13.5 Pro

Page 13: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

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 %)

Page 14: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

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.

Page 15: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

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.

Page 16: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

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.

Page 17: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

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. 

Page 18: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

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

Page 19: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

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

Page 20: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

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

Page 21: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

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

Page 22: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

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!!!

Page 23: Making Dollars and Sense of Classes in Manitoba · Making Dollars and Sense of Wheat Classes in Manitoba Dan Caron, MB Agriculture MAC 2013

Thank You!Dan Caron

[email protected]