The CGC’s decision to downgrade several CWRS varieties has met with backlash from industry — but it might be good news for producers in the long run.
The Canadian Grain Commission’s decision to shift five varieties from the Canada Western Red Spring (CWRS) class to the new Canada Northern Hard Red (CNHR) class as of Aug. 1, 2018 isn’t a surprise to producers. It’s a continuation of the CGC’s evaluation of all varieties within the CWRS class for gluten strength and protein content that started back in 2015.
The changes (billed “wheat class modernization” by the CGC) were expected, if not exactly welcome to some in the industry.
But what exactly is changing and why, and how will the changes impact producers?
What’s Changing, and When?
In 2015, 25 varieties were shifted out of the CWRS class, including popular varieties Lillian, Unity and Harvest. Producers were given a three years’ grace period before changes were scheduled to take effect so they could offload seed.
At the same time, the CGC said a further, unspecified number of varieties needed more testing. Cue this spring, and five more CWRS varieties (AAC Redwater, AC Domain, Muchmore, Vesper and 5605 HR CL) have been shifted to the CNHR class.
“Back when the [wheat class modernization] project came out, there were 25 critical CWRS varieties that were moved to the CNHR class,” explains Daryl Beswitherick, program manager for National Inspection Standards and Industry Services at the Canadian Grain Commission.
But at that time, the CGC also identified what Beswitherick calls “suspect” varieties, for which there wasn’t enough information to make an informed decision on classification.
“We talked to the owners of those varieties about what needed to be done, but we didn’t make a public announcement to avoid causing market harm. They had to [gather] two years of trial data, and then the CGC did end-use functionality work, and it was deemed that there were an additional five varieties that don’t meet the quality parameters.”
Quality parameters for the wheat classes are set by the quality evaluation team at the Variety Registration Committee, which is made up of an industry group including producers, seed growers, end-use customers and millers, representing the whole value chain, Beswitherick explains. The committee makes these decisions based on feedback from Canada’s international wheat customers.
Again, producers will have three years to adjust to the changes before they take effect. “Producers have until Aug. 1, 2021 to make their decisions as to whether they want to keep growing these varieties or clear them out of their handling system,” says Beswitherick.
And for the foreseeable future, producers won’t have to brace themselves for any more reclassifications. Beswitherick says that although the CGC is currently doing a review of the quality parameter tests, the process has been “fixed” and new varieties will receive the correct classification.
“There was a period where there were a number of varieties that weren’t evaluated as well as they should have been, but going forward they will be, so the problem shouldn’t reoccur,” he says.
Why the Change?
Currently our top markets overseas are Japan and Indonesia, followed closely by the United States. Peru, Bangladesh, Mexico, Colombia, Nigeria and China all bring in significant quantities of Canadian wheat.
According to Lisa Nemeth, Director of International Markets at the Canadian International Grains Institute (Cigi), when complaints initially arose from international customers over CWRS gluten strength, the industry took them extremely seriously.
The reason? CWRS wheat is prized specifically for its gluten strength and is added to lower-quality product to ensure consistency in high-volume bread products. For comparison’s sake, Nemeth says Black Sea wheat is typically around the 10 to 11 per cent protein level for winter wheat, where Canada’s CWRS wheat is around the 13 to 14 per cent protein level on average.
Our top competitors are Australia and the U.S. in terms of gluten strength, but CWRS has a different protein quality that customers have adapted to for their processes.
For maintaining the health of our export markets over the long term, consistency is key, says Nemeth. “You want the varieties in CWRS to have a certain gluten strength so that shipment by shipment, no matter where the product is being drawn, it will have the strength to meet customers’ needs.”
But Canada maintained customers during the time of the gluten strength issue, she says, and since the changes started to take effect it’s become a non-issue. “On the last missions that we were on we had no specific questions on gluten strength. This process has seemed to address that issue, so that’s a good news story for quality,” she says.
How will it Affect Producers?
First things first, wheat class modernization will impact producers price-wise if they wish to continue growing AAC Redwater, Muchmore or the other downgraded varieties past 2021. How much, it’s hard to say.
According to Derek Brewin, associate professor and head of the Department of Agribusiness and Agricultural Economics at the University of Manitoba, AC Domain, AAC Redwater, 5605 HR and Muchmore were seeded on over 95,000 acres in Manitoba in 2017. “There will be a cost to farmers who have seeds that were dropped down to Northern this year, but they have three years to adjust, which greatly mitigates that cost,” he says.
Rick Steinke, Canadian Grains Manager at Archer Daniels Midland Company, says that for CWRS varieties now classified as CNHR, the main price determining factor is protein, but the value of the product is a function of global supply and demand.
“Traditional CNHR varieties (Elgin, Faller, and Prosper) are normally one percent lower in protein and result in a lower market price. The value of protein in spring wheat varies from year to year and will depend on global supply and demand realities in 2018,” says Steinke.
But he adds that farmers typically receive a higher yield on CNHR compared to CWRS, which might offset the price impact.