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Getting back into Toledo

IP premiums for soft red and other wheats may open doors to make both reds and white more profitable

In Eastern Canada, if you hear the phrase “identity preserved” or “IP,” it’s almost always in connection with soybeans. And that’s only fair, given the importance of that market. But increasingly, “IP wheat” is also becoming part of the jargon.

In 2015, the soft red winter wheat variety Branson seemed to be the hot commodity across much of southern Ontario. Dubbed an IP variety, it was viewed with great anticipation until fusarium head blight struck and many fields and loads were downgraded.

Today, Branson from Dow Seeds and CM249 from C&M Seeds are aimed at re-establishing the flow of soft red Ontario wheat to the Mondelez Flour Mill in Toledo, Ohio.

Ontario’s soft red sales to Toledo went off the rails in the mid-2000s when the province’s seed industry started chasing yield without keeping the needs of end-users — in this case, a cookie and cracker manufacturer — at the forefront.

“When there was this push for higher-yielding wheat, it didn’t get looked at as far as the specific baking or quality traits that one significant buyer (Mondelez) wanted — it just went for yield,” says Larry Shapton, who recently retired as grain marketer with Hensall District Co-operative, in Hensall, Ont. “We lost these traits that Toledo wanted and, therefore, they significantly reduced us as a supplier and we lost a very significant market.”

“We are not a preferred supplier from a quality point of view,” Shapton now says. “They will buy from us, at a lower price, and if there are quality issues in Ohio or Michigan.”

Shapton says that in order to spread its risks, the Mondelez mill would prefer to have roughly a third of its wheat supply from each of Ohio, Michigan and Ontario, which is why there have been negotiations between the Toledo plant and several seed companies to ensure its baking needs can be met, and why CM249 and Branson are segregated here in Ontario.

Some in Ontario actually blamed Toledo for the whole mess. Representatives of the Mondelez operation didn’t take part in those registration meetings years ago, where the discussions on higher-yielding varieties took place. And since other downstream users were there to ask for wheat varieties that met their needs, the Mondelez criteria got bypassed.

Whoever was to blame, though, it’s been a painful lesson.

Lesson learned

“It served as a wake-up call that all members need to be at the table when we are deciding which quality parameters and varieties meet the needs of the end-users,” says Ellen Sparry, general manager of C&M Seeds.

Wheat is unlike corn and soybeans. If a variety doesn’t meet the needs of a miller or other downstream user — whether it’s for protein, say, or for blending capability — it might never get registered, even if it has great yields.

“(Toledo) will pay a small premium, which we’ll pass on to the producer on both varieties.”Larry Shapton, former grain marketer

“(Toledo) will pay a small premium, which we’ll pass on to the producer on both varieties.” – Larry Shapton, former grain marketer
photo: File

“What Toledo is trying to do is get the overall genetics in Ontario back to a variety that they like or that has the baking qualities that they like,” says Shapton. “They will pay a small premium, which we’ll pass on to the producer.”

That premium now stands at between $0.20 and $0.25 (roughly $7 per tonne), which helps cover the cost of certified seed, although no one is discounting the possibility that there may come a day when that market resets and the premium disappears, making Branson and CM249 commodity wheat once again.

Wheat is a difficult market, with different countries having very different preferences for key quality characteristics, including protein content.

That makes a local market all the more attractive, especially if it’s a big market. So while there are plenty of millers in Ontario that can take the soft white winter, hard red winter, soft red winter and hard red spring wheats grown in this province, says Shapton, the difference is that the Mondelez mill is so large, it can demand the quality that it wants. “Last year (2015) when we produced a million tonnes of soft red, that was the potential market to sell to in Toledo,” Shapton says. “That’s huge. Even a quarter of a million tonnes is big.”

Accentuate the positive

Meanwhile, Sparry puts a positive spin on the re-establishment of the Toledo market.

“The way to look at it is that in Ontario, we over-produce soft red winter wheat and we over-produce it by a significant amount,” she says. “This opens another door to move that oversupply into a marketplace. The more doors we open, the better.”

In the larger context, Sparry also likes the IP prospects for soft white winter and hard red winter wheats, just because so little of those two classes gets grown in the province.

For example, during the summer of 2015 soft white winter wheat volumes in Ontario were so low, it looked like the historic premiums of $20 to $30 per tonne (relative to soft red winter) might need to be doubled, and at least one seed company started putting out advice about the agronomics of growing white, and how to line up a processor or miller to receive it.

Another positive twist focuses on the weather, and the way millers like to draw some of their tonnage from Ontario just in case growing conditions stateside are negative.

“We’re basically a weather control for Ohio,” explains Sparry. “We’re their backup. They can source wheat out of this area and they feel comfortable that we’re going to produce a lot of soft red. The problem comes when we’re not producing the right type of soft red for them.”

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