The contract begins at the wheat board, which will negotiate a sales price with the domestic millers. Based on the sales price, a guaranteed farmer price for a specific delivery point is calculated.
af contributor | lethbridge
Southern Alberta soft wheat growers, on the verge of boycotting the crop over low prices, have won a new cash contract program with the Canadian Wheat Board and western Canadian millers that will guarantee net prices for contract producers.
As recently as the annual meeting of the Southern Alberta Soft Wheat Producers Commission, growers had threatened to stop growing the crop used by millers to make pastry and cookie flour if they couldn’t be assured of a better price. During that meeting, other cereal crop options could provide better returns to farmers, something which would have likely continued to force reduced acres for soft wheat.
Andy Kovacs of Lethbridge, commission executive director, said that the contract program will be run outside of the board’s price pooling system. Farmers can sign up for a production contract for up to 60,000 tonnes of soft wheat. Kovacs said one example of the first contract would assure producers $4.63 a bushel “in their pocket.” It will be a one-time payment at the time the wheat is sold. It is a tri-party contract between individual producers, millers in Western Canada and the wheat board. The wheat must be sold to a miller, or to a grain company which will guarantee movement of the contracted wheat to a miller.
There are some unique clauses in some of the contract, said Kovacs. For instance, the contract through Ellison Milling in Lethbridge offers a premium of up to $14 a tonne on top of the cash contract. To make the contract work, the monthly Pool Return Outlook through the wheat board will stipulate select soft spring wheat at 10.5 per cent protein. That will compare with the PRO for No. 2 grade hard red spring spring wheat with 11.5 per cent protein.
CWB negotiates price
The contract begins at the wheat board, which will negotiate a sales price with the domestic millers. Based on the sales price, a guaranteed farmer price for a specific delivery point is calculated. The guaranteed price varies depending on timing, pricing location, market conditions and quality.
Interested producers must then enter negotiations on the three-way contract with a processor or elevator company that will market to the miller and the wheat board. A basis level will be negotiated between the farmer and miller which will include price factors such as elevation, cleaning, storage and trucking and quality premiums.
When the farmer delivers the grain, the guaranteed price to the producer will be adjusted for the negotiated basis, and the miller will pay the farmer.
Any soft wheat grown outside of the new cash contract will be marketed through the wheat board in the traditional system of initial and final payments.
Kovacs said that with the low production of soft white spring wheat last year, caused mostly by higher prices for alternatives to soft wheat, western millers could run out of the grain by the end of May. That should be a strong signal to growers to plant more soft wheat this spring.
Kovacs said the revival of soft white spring wheat through the new contract will mean a strong demand for the newest and improved Sadash soft wheat variety. Before a contract can be signed, growers must secure enough seed to meet their contracted acreage.