Falling number fallout creating new pricing regime for wheat

It’s not an official grading factor, but falling number is increasingly determining what you get paid

Falling number tests are becoming a key factor in the price you get for your wheat.

But farmers are on their own when it comes to negotiating with grain companies, says the general manager of Alberta Wheat.

“The grain companies say, ‘No, this is an anomaly, we won’t have wet years like this every year,’ but frankly, we believe that falling number is here to stay,” said Tom Steve.

“We as the Alberta Wheat Commission believe that once you start implementing a practice like falling number tests, it will become normalized, regardless of whether the grading system keeps up.”

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While the Canadian system relies on visual inspection to determine grade, falling number has been the international standard for judging the milling quality of wheat on the global market for a long time, he said. Essentially, water and ground wheat are mixed into a slurry, and a ball is dropped into the mixture. The number of seconds it takes for the ball to fall to the bottom is the falling number — and the longer it takes, the better the milling quality of the wheat.

Falling number typically becomes a problem in wetter years, and after last year’s wet harvest, plenty of Alberta producers were confused about the new test they were facing at the terminal.

“The concern is that farmers have never been subjected across the board to falling number tests the way they have been this year in Western Canada,” said Steve. “And many of them are confused as to which system is being used — the visual grade or the falling number system.”

The falling number test isn’t an official grading factor but it is being used more and more often by grain companies.
photo: Canadian Grain Commission

In many cases, grain companies are using both, he added.

“The fact of the matter is that increasingly, grain companies are using falling number as a determinant of quality, and farmers are quite rightly concerned that falling number and visual grading are both being used — and in some cases, both being used to downgrade the quality and the price of their wheat.”

That can mean a serious hit to the bottom line.

Wheat that doesn’t pass muster on the falling number test typically ends up in the lower-value feed market, and the recent price differences between feed and No. 1 Canadian Western Red Spring — commonly used in milling — were between $0.37 a bushel and $1.10 a bushel (depending on the region) on Alberta Wheat’s online price indicator PDQ.

A new ball game

Falling number tests started to become more common in some parts of Alberta — such as the Peace Country — following the wet harvest in 2016. But successive wet harvests since then have turned this into more of a western Canadian issue, said Steve.

“I think that’s what’s sparked a lot of the discussion on social media this fall and a lot of push-back from growers,” he said. “Some companies were requiring a falling number test before they would even take delivery of the grain into the elevator system. That’s a new experience for many farmers.”

And the lack of a consistent standard has left farmers scrambling to try and figure out this new element in their grain grade.

“They’re accustomed to having their wheat graded on the basis of the visual number system that we’ve had in Canada for decades, and now, all of a sudden, this other variable comes into play,” Steve said. “Now the grain companies are starting to put a minimum falling number right into the grain contract. A lot of farmers have never had to deal with that before.”

Typically, farmers would turn to the Canadian Grain Commission to adjudicate disputes with grain companies. But because falling number isn’t an official grading factor, the government agency has no grounds to do that.

“The grain commission is powerless to really do anything about the fact that the grain companies are using falling number to determine milling quality and therefore the price,” said Steve. “They’ve essentially washed their hands of the issue and said it’s up to the grain companies and the farmers to work that out.”

But the commission consulted with farm groups in March of last year to explore whether DON and falling number should be made official grading factors, said commission spokesperson Remi Gosselin.

“The major concern from farm groups was that costs would override benefits and that those costs would be passed on to producers,” said Gosselin. “Based on the feedback that we received during the discussion, we will not take steps at this time to make DON and falling number official grading factors.”

While the commission will continue to explore making falling number an official grading factor as part of the ongoing Canada Grain Act review, farmers will need to get used to its unofficial use for grading wheat at the elevator, said Steve.

“There are some groups that think the visual grading system is the answer, but our view is that the future is likely going to be in more specification-based grading, and that would include falling number,” he said.

“We believe that it is going to be used more and more.”

But it won’t happen overnight.

Right now, falling number tests are time consuming compared to visual grading, and the results can be “quite variable.” Most elevators don’t have the testing equipment on site, and the test itself can take upwards of 15 minutes. So while there are good arguments for shifting away from visual grading — an equally subjective determinant of quality — the infrastructure isn’t yet in place to implement falling number tests across Western Canada.

But that will change, Steve predicted.

“It’s partly the technology that needs to evolve, as well as a change in attitudes. Nothing stays the same,” he said. “We had the same discussions 25 or 30 years ago about protein testing in wheat, and now it’s the norm and wheat is judged based on protein.

“I think in the future we’re going to see more of a specification-based system and less reliance on visual grading.”

Shop around

Farmers will need to become comfortable with falling number tests and negotiating falling number as part of their grain contracts, he added. And the best way they can do that is by knowing the exact quality of the wheat in their bins. Independent labs can test samples for falling number, as can the grain commission.

“It’s not an official grading factor, so it’s not subject to binding arbitration,” said Gosselin. “But producers and grain companies can agree that the Canadian Grain Commission can be used to provide a binding result, and a sample can be sent to the CGC for testing, although it’s not currently protected under legislation.”

“The difficulty is that the grain companies have been reluctant to accept the independent tests or the grain commission tests, so fundamentally, I think it’s going to come down to a negotiation,” added Steve.

“Farmers really do need to understand the quality of the grain that they have in the bin, and then they have to negotiate that with their grain company. They may have to go to two or three different ones to get an offer that they like.”

In some cases, falling number might just result in a higher grade. Steve has heard of instances in the last crop year where wheat with questionable visual appearance had a falling number in excess of 300, and the grain company made an offer for a No. 1 or No. 2 wheat. So it can pay to know exactly what you have in the bin before you begin your negotiations.

“It works both ways. It can be something that discounts you, or it can be something that benefits you,” said Steve.

“Producers would be well advised to just become much more informed of the technical specifications of what they have in the bin.”

About the author

Reporter

Jennifer Blair is a Red Deer-based reporter with a post-secondary education in professional writing and nearly 10 years of experience in corporate communications, policy development, and journalism. She's spent half of her career telling stories about an industry she loves for an audience she admires--the farmers who work every day to build a better agriculture industry in Alberta.

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