CNS Canada –– Relative strength in the feed wheat market in Western Canada compared to milling wheat is making feed channels a more attractive option for some growers with lower-end milling wheat left to sell.
“Right now, feed is pretty well on par with a lot of the base milling-grade wheats,” said Jared Seitz, trade manager with Agfinity, an online grain brokerage based out of Stony Plain, Alta.
“When you compare feed wheat with the milling market, we’re seeing quite a few farmers selling into (the feed market) because it doesn’t make sense for them to hold out for the elevator pricing,” he added.
“We have a very tight barley supply/demand scenario,” said Jerry Klassen, manager of Swiss-based GAP S.A. Grains and Produits in Winnipeg.
As a result, domestic livestock feeders are substituting more feed wheat in their rations and “we have relatively strong domestic (feed) prices compared to the world milling market.” The weaker Canadian dollar is also limiting imports of U.S. corn and DDGS, he said.
“With the world milling prices near historical lows, we’re seeing low-protein milling wheat move into feed channels,” he said, adding that “wheat will continue to move into feed rations until something changes fundamentally in the world wheat market.”
Seitz said current weakness in the global milling wheat market was weighing on feed prices as well, “but there seems to be a delayed reaction” as domestic buyers still have demand to fill.
The demand scenario is looking more bearish heading into summer, given the seasonality of the market and Canada’s declining cattle-on-feed numbers, according to Klassen.
Seitz said there was a possibility for some spot rallies in the summer months, before the new crop is available. However, he said, the window of opportunity for any rallies will likely be narrow, given that seeding is well ahead of the normal pace.
In addition, “if we continue to see prices declining over the next few weeks, by the time we get to the spot rallies in July they won’t be that exciting,” said Seitz.
Any rallies then would likely just bring feed wheat prices back to the levels seen currently, he noted.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.