US Grading and Pricing

[charliep]

I would appreciate someone who has used the buyback program going through the grading and pricing process in a US elevator. How is the crop graded/in what order of quality characturistics? How are the quality grids applied? Is there any attempt to maintain variety or quality integrity or is the grain simply blended based on quality going to get an end result quality?

[ianben]

Hi Charlie
In the UK about 5yrs ago we had some three way meetings with millers transport and farmers, where we all shared our problems and grievences.
I found them very imformative. There is more to making flour than grinding wheat, and problems with transport you don,t see from the farm.
I was also surprised how little millers understood our problems and difficulties.
This is one of the reasons I think we should all stick with what we know and not try to be millers, bakers, or pasta producers.

Millers where adamant that they preferred un-blended grain either by variety or falling number.
In order to produce flour with consistant baking quality they blended wheat, but they wanted to do the blending with pure consistant samples.

So now we supply milling wheat of one variety and NOT mixed to average falling number.
Supermarkets also demand tracability, so now all loads can traced back to the farm/field of origin and all imputs checked.
I do not think we have obtained much better prices by doing this but at least they buy OUR grain.

I believe Warbutons buy wheat from Canada with this type of assurance.
Is this true?
How does this work with the CWB?

I understand the difficuties involved when dealing in the huge tonnages, but just because you say you do not get complaints with the present system does not mean you are supplying what the customer wants.

My hay and straw customers don't complain either,they just take their business to someone else.

I would be interested to hear how it is done in the US too.
Can anyone tell us ?

Regards Ian

[Braveheart]

We have some experience with buybacks and US grading & pricing practises. It's been a few years since we've gone that way. Since EEP disappeared there have been few times that price has more advantageous on the US side for wheat. Barley, especially malt, is a different story. The most advantage with a buyback right now is delivery opportunity.

The co-ops elevators that we have dealt with buy on a grid that discounts for damage. Damage seems to be anything that affects kernal soundness (visually). This includes fusarium damaged kernals, ergot, midge, etc. Discounts for damage are applied as cents per point of damage. Protein testing is also done with premiums paid in increments. Bushel weight has an effect on the final bid as well. To obtain the best bid the manager or buyer can offer, he/she will send a sample for further testing which will include falling number tests and a vomitoxin test. Sometimes the testing lab is right across the street.

The discounts are applied to the base price which is usually posted on a chalkboard. Be aware though that that posted bid is just a starting point and in fact, sometimes the price offered to the farmer is higher than the posted bid, no matter what damage exists.

The criteria for pricing is solely at the discretion of the manager. He/she will check his/her bids daily. They know what quality exists in their system and have experience in blending to meet their purchasing agents needs. Their decision is based partly on the fact that unlike Canadian grain handlers, US elevators are merchandisers and handlers of wheat, not just handlers.

The US grain handling system has been rationalized for some time, and as such the manager has lots of experience with incentive rail rates as a negotiating tool.

Be aware when comparing prices that the US bushel is smaller than the Canadian bushel. The US bushel is based on pounds Winchester rather than the Imperial? system in Canada.

This is our experience. Maybe some American friends are watching this discussion forum and can add more insight.

Regards,

Braveheart

[charliep]

Thanks for both your comments. I haven't mentioned this Ianben but I can identify with your business. My brother farms outside of Calgary, AB. and a major portion of his income comes from small square hay bales sold to hobby and the race horse market. He also has moved from a registered hereford farm to a what I would call natural beef. That is, marketing beef directly to customers based on the management practices of the business and the confidence these customers can have in the product - drugs only used to maintain health of animals, humane animal practices, etc.

Just to indicate why I asked the question is work through ideas as to how things should work in a perfect world (no such place I realize). A part of this process is to look at how other countries do things, evaluate their success/room for improvement and ask whether it has a fit here.

I will let the discussion carry on from here.

[chas]

Braveheart: What is a Winchester pound compared to an Imperial pound. What does a bushel of wheat and barley weight in the USA. Chas

[TOM4CWB]

Charlie,

Getting busy now but will do a brief rundown.

My US and Canadian weights were very close, and in Montana wheat bushels are 60 lbs.

The posted price is usually on 14% protein with a sliding scale above and below .2% higher with moisture about half a percent lower.

Oslo however was priced off a 12 percent base protein, sliding up and down. On the lower proteins the 12 percent scale paid more, and on the higher protiens over 14 percent then this base rate paid more when selling 16 percent wheat.

Ergot was not tolerated anywhere near like CGC grades do. They prefer none!

It seemed that the elevator was sending unblended wheat straight to the mill, just as Ianben said in England.

Over 3 years of hauling to Montana, I was treated very well, was paid much like we do in Canada, except in US dollars of course!

Lower grades with higher protein was the main reason that I shipped south, as the CWB refuses to pay protein. This is a travesty, and solving this issue alone would be a giant step ahead.

Hope this helps Charlie?

[Braveheart]

Chas, I don't know what the difference is between a pound Winchester and our system for a pound. I have asked many but no one can clarify it. It does exist however.

For marketing grain the smaller measure in the US has an effect on the lighter commodities. When we would weigh a truckload of oats and then proceed to the US, our volumne of oats was much higher in the US. With barley there were a few more bushels per truck, and, with wheat slightly more.

I believe that the standard per bushel weights are the same, ie 60 lbs./bu for wheat, 48 for barley, etc.

[Braveheart]

Charliep, we can only dream of a perfect world where farmers set prices above costs, and efficiency creates more profits. The real world however, is much different.

The real world sees the consumer demanding much more in terms of food safety and quality assurance. Traceability of where and how the food was grown, stored, processed and transported is increasing in importance. Processors will soon all be required to adopt HACCP measures if they want to continue to be viable.

But, for most producers, having to adapt a tracking or tracing or quality control program to their livestock or grain operations will not often result in more income. It will just ensure that markets are retained.

Branded products and farm produce marketed with relationship marketing techniques have the potential to increase product value from small amounts to lucrative returns.

Regards,

Braveheart

[TOM4CWB]

Charlie,

On falling #'s I sent in my samples, and was told they were excellent, and then never heard another word about them.

The machine to test the viscosity of the wheat slurry was sitting on the grading table, but it looked like they did most of these tests at head office, and did official grading off the State grading official office in Billings.

I did recieve official documents for each lot from Billings, for bushel weight, protein, etc.

I believe this is better than the CGC system, although, it takes just about a week longer to get paid as they wait for the results to come back.

On Dockage this was different as any dockage over half a percent made a sliding scale discount grid kick in.

However there was no cleaning costs charged, or elevation!

Boy, sure many things to think about that are different.

My wheat price was established off Seatle port price, and then freight and basis was subtracted.

If I think of more I will add later!

[Braveheart]

Charliep, in terms of what other countries are doing, I think Australia has a quality assurance program they call Graincare. I know very little about it except that it seems to be a little cumbersome in how it fits with the other sectors' programs.

What I mean by this is that, there is Cattlecare, maybe Hogcare, perhaps Sheepcare, and I've heard some complaints that there are too many commodity groups with different criteria and all adding excessive costs and administration.

It begs the question for Canada, can a quality assurance system work the same for grain as for livestock? Are the issues the same? Are grades still important, or are buyers now so stratified that delivering to specs of the buyer all that should matter?

Braveheart

[bbrindle]

Chas, as Braveheart indicated the difference in the bushel measurement is very important for some crops. Farmers marketing their oats to the US have discovered this quite quickly!

The US uses a Winchester bushel and Canada uses an Avery bushel. I was told a Winchester bushel is 0.8035 of a cubic foot, while the Avery bushel is 0.7786 of a cubic foot. The Canadian Grain Commission can provide information on determining the metric test weight, and then converting to Avery or Winchester bushel. The CGC has a table for all the commodities. For instance, the barley table show g/0.5l, kg/hl, Avery lb/bu, Winchester lb/bu. Often with barley we refer to 48 lb to bushel. By looking at this table you'll find that 48 lb/bu (Avery) is 44.7 lb/bu (Winchester). And that's about all I know about this!

[ianben]

Hi All
Its interesting how different marketing is in other countries.
Ergot is zero tolerance for bread wheat over here too.
Anybody know about those Warbutons contracts??
Are they bluffing when they say they get the same specs and assurance from Canadian wheat that they demand from us?

Regards Ian

[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?