What's Milling Wheat Worth?
(February 1, 2004 - Alberta Agriculture) Do you know what
milling wheat is worth today? With the announcement in Dec. 2003
regarding the 2002/03 $85 million wheat pool account deficit, it has
become more important than ever for farmers to be cognizant of the spread
between open market prices and CWB pooled returns.
While an open market for Eastern Canadian milling wheat only exists in
theory at this time, it is possible to calculate what a Prairie grain
company would bid for milling wheat. The calculations are similar to
how cash prices are found for canola.
"Since most of Canada's grain export surplus moves out of
Vancouver, the west coast of North America is generally regarded as
the main pricing point for spring wheat," says Brenda Brindle
with Alberta Grain Commission.
"One way to get an indication of the value of milling wheat is to
look at the price of a comparable grade of U.S. grown wheat in the Pacific
Northwest (PNW) market."
The PNW market for wheat similar to high protein No. 1 CWRS is
curre3ntly trading at approximately $0.85/bushel over Minneapolis March
futures. In early January 2004, the futures were at $4.1225, which
gives a flat price in the export market of about $4.97 US per bushel.
In Canadian dollar terms, this makes spring wheat worth about $6.33 per
bushel or $233 per tonne at export position.
To bring that closer to farm gate, the cost to move grain from the
interior to export position must be considered.
This cost differs for every delivery point on the Prairies however; the
CWB estimates to be $45 per tonne on average in Alberta.
In theory, the open-market milling wheat price delivered to an elevator
in Alberta might be around $1.88 per tonne ($233-$45), or
$5.12/bushel. The current Pool Return Outlook for milling wheat in
Alberta is $151 per tonne (CWRS #31 13.5 per cent) or $4.12/bushel.
The pooled price is not a spot price since it is the CWB's estimate of
crop year returns. |
