The Price is Right, but not Everywhere

The Price is Right, but not Everywhere

Are we Relying too Much on the SRWW Class?

The Ontario acres reports are in. Ontario planted roughly 860,000 acres of wheat in the fall of 2017. This is a good number and shows that Ontario producers are starting to get more serious about including wheat in their rotation again, something that wasn’t happening enough only a couple years ago.

When you look at those acres, the ratio between classes continues to get lopsided to the SRW side. 2017 showed 89% of the total acres being soft red, an increase of 3% over the previous year. The big question is, does this put us at risk of growing too much of one class of wheat? We all know that Ontario overproduces the amount of Soft red wheat we grow, we export far more than we use domestically. Putting all of your eggs in one basket has never been a great idea for investors, so why would your wheat production be any different. Maybe it is time to look beyond locking all of our acres into what has traditionally been the lowest price class of wheat.

Why? 

One of the other trends we have been seeing is a large reduction of production in the hard wheat classes. Ontario uses all of the hard wheat we produce domestically and, although we may have overproduced for the market in the past, the market requirement seems to be on the incline for hard wheats.

For reasons beyond the grower’s control, we did have an overproduction of HRW for a year, maybe two. The indications from many of the milling and grain trading companies that we deal with is that we have corrected, and maybe over-corrected that oversupply to the point of having an under-supply again.  With HRW acres declining for 3 straight years, we are definitely going to have more demand for the next couple of years.

Keeping that in mind, it is more important than ever to pay attention to the specifications required by end users.   We need to ensure that we are producing a minimum of 10.0% protein in HRW and 12.0% in HRS.  Growers who have been meeting these requirements have been getting rewarded for their production.

TAKE ADVANTAGE OF OPPORTUNITIES

The short story is that there will be premium opportunities presenting themselves to HRW growers in the future, but the game has changed. From all indications, millers are looking to tie up contracted production to ensure supply.  This means that you may not get the premium pricing unless you sign up to a production contract, similar to the IP soy market. These opportunities may not be available at every grain elevator or from every buyer for various reasons, so price around and make sure you know what the contracts in your area are.

Hard Red Spring is now trading at roughly a $50 per MT ($1.36/bu) premium to Soft Red at many grain elevators showing there is increasing demand for it as well.  Including some spring wheat in the mix if you are in the right growing zone could be a good choice.

Consider spreading your pricing risk by growing multiple classes of wheat. With new management techniques, getting protein into acceptable levels is now an easier task, but you have to follow the right steps. Grow more wheat.  Get higher corn and soybean yields because of it. Grow multiple classes of wheat.

About the Author

Rob has been involved with C&M Seeds since 1999, working in many roles throughout the organization. He now is the Sales and Marketing Manager and a self proclaimed "wheat geek".