(Resource News International) –– Feed wheat cash bids in Western Canada have been slowly firming over the past month, with some of that tied to the reluctance of producers to deliver and an improvement in the price of dried distilled grains (DDGs).
“The upside in feed wheat values are being limited, however, by the continued liquidation of the hog and cattle herds in Western Canada and steady competition from the DDGs,” said Jerry Klassen, a Winnipeg market analyst and commodities trader.
The value of feed wheat has really begun to reflect the direction DDG prices take in the U.S., he noted.
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“And there has been a bit of firming in those values as of late,” he said.
Both commodities have been competing for the same demand, he said.
The slow but steady upside movement in feed wheat bids was expected to continue as long as values for DDGs remain firm.
“If DDG values begin to soften, then feed wheat bids will likely follow suit,” Klassen cautioned.
He also anticipated producers who grew wheat this year may also be inclined to deliver into the domestic market instead of delivering to the Canadian Wheat Board.
Low-protein, No. 3 Canada Western Red Spring (CWRS) wheat has been basically equalling the export pool return outlook (PRO) value, he said.
However, if the quality of the wheat is below No. 3 CWRS, the producer will deliver into the domestic market, the analyst said. If the wheat is high-protein, and above No. 3 CWRS, the producers likely signed it up with the CWB.
However, it was important to note that most producers, when signing up, normally agree to move this wheat under the A quota calls, he said.
“And the A quota calls have already been made, and producers who have wheat still left over are now likely to deliver it into the domestic market,” Klassen said.
Helping to keep feed wheat bid prices firm was the fact that about 80 per cent of the wheat crop will grade as Nos. 1 or 2, which means feed wheat supplies are going to be on the tight side.
“We probably have about three million to five million tonnes of feed wheat for the domestic industry to work with,” Klassen said. “As a result, the domestic market for feed wheat will likely need to show a premium over export values in order to keep some feed wheat around for the local market.”
There are instances, he said, where feed wheat is desired over DDGs, particularly by certain hog feeders and ethanol producers.
Cash bids for feed wheat delivered to the elevator in Saskatchewan, based on Prairie Ag Hotwire data, currently range from $3.25 to $3.89 a bushel, in Manitoba around $3.83 to $4.23 a bushel and in Alberta from $3.46 to $4.70.
At the end of September, cash bids for feed wheat in Saskatchewan were $3.02 to $3.25 a bushel, in Manitoba from $3.58 to $3.67 and in Alberta from $3.52 to $4.49 a bushel.
