New wheat marketing scheme to apply for next harvest

Press, 23 September 1983, Page 20

New wheat marketing scheme to apply for next harvest

The wheat marketing scheme, recently agreed to in principle by the Wheat Board and the industry, will prove a further stimulus to improvements in quality, believes the chairman of United Wheatgrowers, Mr Arthur Mulholland. The board has released an outline of the new scheme but a number of details remain to be worked out and changes are possible after a period operation.

The scheme will, however, operate for the coming harvest and it contains some extra requirements of growers.

These requirements are:—

• On an advance notification form distributed by the board, advise details of each cultivar sown. This will probably include areas grown, and may include estimates of yield and estimates of tonnages. These forms will be distributed by the board early in October and will need to be returned by October 20. • New growers will need to apply to the board for a notification form and brokers should also inform the board of any new growers before the end of September.

• The notification forms will also provide for growers to nominate, if they wish, to receive an advance payment for each line which is not delivered in the prompt months (February and March for Canterbury and Marlborough).

Mr Mulholland believes the notification scheme will give the board a much earlier indication of the varieties sown and the expected yields. This is basic information which a commodity board must have to plan its disposal and import Surchasing arrangements, e said. But incomplete figures would negate the benefits from the notification scheme and he has urged growers to complete the forms with their own details and return them to the board. Grower notification forms will also provide cross-re-ferencing facilities to the Wheat Research Institute harvest test result which is now used for grower declaration purposes. The growers* declaration scheme will continue in its present form. The board says it has approached the Treasury with a proposal for an advanced payments system to operate in 1984 and grower notification is an integral part of this proposal. Under the new scheme flourmills will place orders with the board in advance of the season for the wheat they require on the basis of M.D.D. score, protein count or other determinant, including variety. But in all

cases of dispute the suitability of the wheat for milling and baking is to be established by the M.D.D. process in accordance with the Wheat Board regulations.

Mr Mulholland has pointed out that flourmills will be asked for very detailed specifications of their requirements. These quality parameters are being used on the flourmilling side of the industry and not as determinants of prices paid to the growers. He said growers indicated at recent meetings that they would stick with M.D.D. scoring for quality determination and that they were reluctant to move into protein testing for grower price determination. The board will continue to purchase all wheat of milling standard, M.D.D. 12 and above, at the prices notified by the board but this is to be supplemented by the establishment of a wheatgrowers’ national pool.

The pool is to be available to cope with the situation where, because of seasonal or other factors, there is more lower scoring wheat than can be used by flourmills in the production of a quality competitive product. If the board cannot sell this wheat outside the milling market at the standard milling wheat price, it has either to require mills to use the wheat or to sell it at less than the standard milling price. The pool will allow the board, in consultation with United Wheatgrowers, to take the second course, with the loss to the board being met from the pool. United Wheatgrowers has pointed out that the provision for a category B pool payout is the only place in the scheme where growers could be considered to be “giving away” something compared with the existing marketing arrangement.

But category B wheat represents only about 10 to 12 per cent of the wheat accepted for milling. Also most of that B wheat could be expected to be sold at standard milling price, with the pool provision only being used infrequently. “The B pool won’t see big reductions in prices to growers,” said Mr Mulholland.

Another of the quality determination details which hasn’t been worked out is what falling number, as a measurement of sprout, will be applied. United Wheatgrowers has insisted on a falling number of 200 as a minimum for acceptance, but millers consider that the falling number for wheat for bread*flour should not be less than 250. Mr Mulholland said it would probably be up to the board to decide what number to apply as a minimum.

Flourmills have to indicate their requirements, under an M.D.D. or protein basis, under the following headings; varieties preferred, contract for “premium” quality wheat, category A (M.D.D. 15 or above), category B (M.D.D. 12 to 14 or Karamu or Bounty), by protein if desired and non-milling grade (under 12 M.D.D. or protein range to be stated).

The board will inform wheatgrowers by regions, through United Wheatgrowers, of the requirements of mills and, to the extent possible from the grower notification data and the miller order forms, advise growers and brokers of possible pre-harvest plans for wheat disposal.

The board will also discuss with mills the likely availability of wheat and as soon as the information on the new season’s crop can be obtained from the W.R.1., further discussions will be held with mills to revise earlier conclusions and arrange to supply wheat as close as practicable to the mills’ orders.

Mill wheat requirements will relate to each mill’s annual flour production quota as advised by the board.

The existing contract arrangements for speciality wheats such as durum, purple wheat and wheat for the production of biscuit flour will be extended, as required, to include premium wheats for specialist end uses and wheat for feed. These wheats grown under contract will not form part of the nations! pool arrangements.

The study group had regarded premium wheat for specialist end uses as being above protein 12, but considered that market demand should determine the quality, quantity and price paid.

The wide contracting provisions, under scrutiny by the board, would open the way for extra payments for quality and safeguard the present arrangements covering the growing specialty feed wheats which might have a low bake score but a high yield, said Mr Mulholland.

They would also be a spur to growers to get higher protein counts by timely applications of nitrogen. “A lot of farm management practices can be applied to lift quality without lifting yeild,” he said.

Other provisions in the scheme ensure that the feed wheat trade will obtain board approval in advance of each season to a total (and by district) area for contracts for wheat for feed. In the South Island this would cover the February to April period and

would not exceed 30 per cent of annual feed usage, say 10 to 15,000 tonnes. In the North Island, board approval would be dependent on it being satisfied that the feed contracts would not adversely affect the supply (up to 20,000 tonnes of wheat) for flourmilling to Manawatu Mills, Ltd. Feed mills will continue to take up non-milling grade wheat as at present and continue to purchase cateaß wheat from the at the standard milling price to the extent that the board is able to make this wheat available. The feed mills haven’t been able to adequately plan their supplies of wheat, said Mr Mulholland, and the contracting arrangements will give them some measure of security over supply. He believes that in most of the established wheat growing areas growers will always attempt to grow category A and the category B system will be a sort of parachute. In lesser areas growers will probably continue to grow for the feed trade and this is also recognised in the scheme.

“For years New Zealand wheatgrowers kept producing in a pricing system which clearly disadvantage them,” said Mr Mulholland.

“Only in the last three or four years have we had a system which offers the ‘true’ world price. “Having accepted that system, we must be prepared to stand up to the quality provisions,” he said. New Zealand wheat had been down-graded in the past, but its quality was good and the country had potential to greatly increase output, perhaps for export. The marketing scheme was required to meet the gradually increasing threat from Australian wheat and flour granted access under the C.E.R. arrangement. Recent studies had shown that intensive cropping enterprises could generate more than half as much again foreign exchange earnings than pastoral enterprises under the same conditions, said Mr Mulholland.

Mr Roger Lough, of the Agricultural Economics Research Unit at Lincoln College, told the Dominion Agriculture Section conference in Wellington earlier this year that a case can certainly be made for expansion of the arable sector. Although the New Zealand wheatfarmer had been criticised as an inefficient producer of an inferior product, Mr Lough said this was not true. “Since 1973 the Wheat Board has, in all but two years, been required to import wheat.

“Yet in each case the cost

of imported wheat landed in the North Island has been greater than that of the South Island wheat landed in the North Island.”

On a price basis South Island wheat more than competed with Australian wheat.

He agreed that from a purist’s point of view the quality of South Island wheat was inferior to Australian, but added that freshness and presentation dominated consumers’ purchasing decisions.

Mr Mulholland contended that the bake score of imported wheat was not much higher than domestic wheat and that North Island mills preferred to use the local wheat.

Mr Lough had said the earning capacity of the arable sector in overseas exchange was the foreign exchange value of the imported inputs subtracted from the foreign exchange value of exported product. He illustrated this realistic earning capacity with examples of specific crops from the 1980-81 season.

Wheat had a foreign exchange value of $9OO per ha, and required $219 per ha of imports to achieve this. Peas were perhaps the most extreme example, earning $lOOO per ha and using only $l7O to achieve this. Mr Lough contrasted these figures with those obtainable from sheepfarming on arable land where $460 per ha of foreign exchange was earned with imports worth $56 required. Over all he said that an extra $284 per ha of foreign exchange could be earned by a farmer changing from running sheep to growing wheat.

However, this concept was impractical in reality, he said. “A farmer does not decide on the basis of foreign exchange earnings what enterprise to undertake, but rather on the basis of gross margins — or what he will get of the enterprise himself.

“What is most profitable for the country is not what is the most profitable for the producer,” he said.