US Grading and Pricing

[charliep]

Ianben

I will make a crack at explaining the Warbuton contracts to you (I should leave till I can do more homework but others who can fill in the gaps/I can do more homework next week).

To start at your end of the world my understanding about your Warbutons. My knowledge suggests that Warbuton is an high quality upper end grocery store with a good reputation for quality. A part of this is their bread. Canadian hard red spring wheat is likely the best in the world although the market place has gone a long ways in getting similar bread qualities out of some of the softer wheats. Does Warbutons highlight the fact they use Canadian wheat on the bread labels?

UK business is mostly out of the east coast of Canada meaning that grain has traditionally been source out of Manitoba/S.E. Saskatchewan. Fusarium head blight is becoming more and more of a problem in this area so the draw area is expanding to most of Saskatchewan.

Warbutons have representives in Canada (Brandon I think) but the contracting programs are run by two domestic grain companies (agricore and patterson - please correct me if there are additional). The contracts are variety (Teal plus others - I have to get help here/do research) and quality specific (high protein 1CWRS with high protein - is 2 an option with a discount?). Again, I have to do some homeworkd as to whether there are other quality requirements like falling or whether the assumption is that our grading system catchs these factors. Farmers are paid a premium to CWB total payments (somewhere in the $20/t or 50 cents/bu but I have to check).

I think there is support on the agronomic side - some type of crop scouting. There may be some things tied in like use of the grain companies seed/herbicides but again I have to get the assistance of farm managers who have used the program. I am not so sure as to delivery commitments and whether storage is paid.

I look for farm managers who have used the program to comment. I also would argue this is an example of a value chain that works at least to some extent. Comments.

[cropduster]

Now how could this be....... some farmers getting paid more than others within our wonderful CWB system!!!!!and not even a separate pool????Could this be a form of exemption thalpenny???/ Shudder the thought!!

[TOM4CWB]

Cropduster,

I agree,

There is one law for the goose, and another for the gander!!!

I think we are the gooses!(my wife tells me there is no such word, appopriate isn't it?)

Pooling was supposed to pool all returns, because we all love each other sooooo much that we are willing to share everything, I think it works this way, right?

What about the $18.00/t premium paid by the flour mills to the Soft White Wheat guys, why isn't that put in the pools?

I don't understand how this system can be justified, sort of being half pregnant, isn't it?

If I supported the Monopoly, then I could have had my premium too!

Isn't this how the mafia and biker gangs work?

Is this really fair, and a commercially responsive responsible system?

[TOM4CWB]

Chas,

I am sure that a pound of wheat in Canada is a pound of wheat in the US.

Highway weights in the US are in pounds, and when I weigh my truck in Canada, it still weighs the same in the US.

When it comes to pounds per bushel, I did not find that to be a problem when delivering, CWES, CPS or CWRS, they all made 60 pounds per bushel, every load. I did not notice any significant difference in bushel weight quality betweeen Canada and the US, barley as they have mentioned is very different.

When I unloaded 60,000 lbs of wheat, I got paid for 1000bu.

[ianben]

Thanks Charlie
Warbutons is a family run bakers est. 1876 and bake their bread to a traditional resipe. There is no mention of the source of the wheat on the label.
They supply all supermarkets and small shops. Thier bread is always the most expensive, usually twice own brand loaf.
I buy it because it tastes the way I expect bread to taste, but then I was born just after the war when all bread was made from Canadian wheat.
They can make bread from other wheats now but they are harder somehow and have a different taste.
How does the CWB agree to this extra payment?
Is it because there is some form of tracability?
That is what they want from us but for FREE!!!

Regards Ian

[parsley]

Oats in US is 32 lbs.

Oats in Canada is 34 lbs

Parsley

[charliep]

Ianben

My understanding is the CWB doesn't control the extra payment but rather allows it to happen. The CWB simply stands aside (recognizing the base grade/protein price is still in the CWB pricing pool) and allows Warbutons (with the domestic grain companies they deal with) to establish premiums for quality and variety specific hard red spring wheat. Traceability back to the farm gate is important to Warbutons and the system allows them to have this (at a cost). The farm manager has extra requirements to grow this product for which they are being paid.

As you can tell from previous notes, there will be discussion.

[TOM4CWB]

Charlie,

I did some checking on US bushels and they are Winchester, 2,150.42 cubic inches, 32 US dry quarts, or 35.42 liters.

The US grading tables say #1 is 60lbs/bu, and #2 is 58lb/bu.

What I found more interesting was the Hard Red Spring wheat category definitions!

Dark Northern is 75 percent or higher hard viterous kernals (HVK), Northern Spring is 25 to 75 percent HVK and Red Spring is under 25 percent HVK.

In Durum, they use the same type of system using grade names to identify quality, rather than numbers!

The US system is much easier to sell to a customer than the Canadian one.

In Canada, a wheat with less than 25 percent would often be feed wheat, but in the US it is named Red Spring wheat.

If I am a merchant selling a product made out of these two grades, which one is easier to sell to the consumer?

I would say the answer is obvious!

Flour made from US #1 Red Spring Wheat, sound much better than flour made from Canada #3CWRS or Canada Feed Wheat, even though both are exactly the same lot of wheat.

We can learn much from the Americans, and be better marketers if we take their best ideas and improve on them!

[chaffmeister]

The Warburtons program is quite unique in Canada for the reasons mentioned earlier. The most notable feature is that the farmers in this program get paid a premium - I'm told it's $20 per tonne (so Charlie, you're right as far as I'm concerned). In addition, the grain companies - Agricore and Paterson (right again Charlie) get an undetermined (non-public) amount that I will guess is between $5 and $8 per tonne, above and beyond the usual CWB handling tariff. This premium to the grain companies is to compensate for additional logistics, oversight, risk, and opportunity cost.

The premiums paid to the farmers flow outside the pool and are meant to reimburse the farmers for following strict production and IP practices - payment for additional work and risk, so to speak. It's for this reason that the CWB chooses to allow it (thalpenny, correct me if I'm wrong). In other words, the premiums paid are not for the wheat, they are for the extra steps to ensure compliance with the program.

Warburtons apparently pays the CWB "card price" which is the publicly stated CWB selling price and is a premium to most other sales which are negotiated - kind of like paying sticker price for a pickup. This is the amount that is pooled. The other premiums are not pooled as they are not in payment for the wheat itself.

The program tends to be for three varieties each year. At harvest, Warburtons takes in fairly large samples (5 kgs, I'm told) from each farmer. At their test lab and bakery in Brandon (right again, Charlie), they determine the best mix of the whole crop they have contracted and can achive throughout the year. Based on these tests, Warburtons then programs the shipment of the whole "crop" so that on each vessel and throughout the year, they get a consistent blend of the three varieties based on the proportions determined in their tests. This means that each farmer's crop is shipped according to the program throughout the year - basically, at harvest, each farmer knows exactly when he will need to deliver throughout the crop year to satisfy his contract.

Consistency is the key to the whole Warburton program. Through this program, they know that each vessel that arives in England will have the same proportion of varieties and each vessel load will provide the same baking characteristics as the others. This is something they feel they cannot get with the CGC based Canadian system.

So Warburtons buys the wheat from the CWB and then pays a premium to farmers and handlers to allow them to pre-arrange shipments based on the quality produced in any specific year.

Hope this helps.

cm

[charliep]

Braveheart,

Just a note to recognize your comments about the difficulties of doing the right things to achieve quality needs and then having this become the standard with no premium. Head scratching around this issue is one of the main reasons I am getting a little short of hair on the top of my head these days. Be it right or wrong, one of the things that gives me a buzz in my job is to start from customer needs/requirements and then to translate this into profitable actions for farm managers. As you say, a tough job for everyone. A reason I am an active participant in Agri-ville is because I pick up lots of ideas from people like you who are the front line doing the business. I want to keep discussion around this area going.

[ianben]

Thanks Tom and cm
It seems what the millers told us was over here was correct. They do like to do the blending with different individual varieties of known origin.
Looks like you guys are managing to get paid for doing this, over here they have told us unless we provide wheat with this assurance they will not buy it.
So we jump through the same hoops as you for the same premiums we had before!!!

Nice to hear from you again cm. Thanks again to you both.

Regards Ian

[parsley]

On Easter Monday, a producer told an interesting story to a bunch of us:

Across the border in the USA, a group of farmers are going to build a large hog operation. They have decided to sell all their grain that they produce themselves and instead purchase feed from Canadian feed mills because the price of Canadian feed is so low .

Hmmmm.

Parsley