Wheat marketing scheme for 1986

Press, 4 April 1985, Page 25

Wheat marketing scheme for 1986

The Wheat Board has released a wheat marketing scheme for the 1986 harvest, freeing up a significant portion of the industry in advance of the Governmentordered deregulation which takes effect from early 1987.

Mills will be able to contract with growers, perhaps through brokers, for 50 per cent of their milling and feed wheat requirements.

For the remainder of milling wheat that meets new grading standards (based on variety, protein content and falling number test) the Wheat Board has also announced a new price setting system which relates to the current Australian f.o.b. price. That aspect of the new scheme has been criticised by the leaders of United Wheatgrowers, Ltd, the grower representative body. The chairman, Mr Ness Wright, said that the new floor price formula did not fairly reflect the market forces. “A more accurate assessment of the prices paid to growers would be on the basis of Australian standard white wheat c.i.f. (landed) New Zealand ports less the cost of transport from producing areas,” he said. The f.o.b. basis, rather than the c.i.f. basis, also asked wheatgrowers to indirectly subsidise other parts of the industry. Mr Wright said this was because trans-Tasman freight was believed to be $llO a tonne landed Auckland while internal New Zealand freight from the South Island growing areas to the biggest market in Auckland averaged out at $B5 a tonne.

Mr Wright and other officials of United Wheatgrowers met all millers in the South Island this week to talk about contract requirements. “Because of the change in board pricing policy and the opening up of half of milling and feed wheat trading to contracts, there is no mechanism for growers to judge with any certainty what a reasonable price would be for delivery 18 months hence,” he said. “United Wheatgrowers advise that it would be unwise for growers to enter into contract negotiations until the position is clarified and all options explored. “All wheat growers will be contacted by letter and meetings held in the growing regions to explain in detail why United Wheatgrowers directors are unhappy with the marketing proposal for 1986,” Mr Wright said. The introduction of contracting for 1986 would mean increased involvement for agricultural merchants acting as brokers, according to a merchants’ spokesman, Mr David Thomas.

The merchants would be required to liaise between growers and mills, ensure that the desired varieties were grown and that seed was available, to advise how the best returns could be obtained and assist with segregation and storage. It was already evident that mills were going to contract by variety and by protein content and that storage segregation was re-, quired by both determinants.

Merchants would expect to be adequately compensated for this extra liaison, said Mr Thomas. He anticipated a very busy few weeks through sowing, explaining the system to growers and seeking mills contract requirements.

The director of the Wheat Research Institute, Mr Tom Mitchell, said he was happy that the bake score would be used for the purpose for which it was intended, information for millers and bakers, and that payments to growers by bake score would be eliminated. However, the full bake test procedure would be required again next harvest for the valuable information it provided and the determination of damaged or undamaged grain in the top two grades.

The 1986 scheme contains the following highlights:

• Flourmills can negotiate directly with growers for up to a maximum of 50 per cent of their requirements for quota flour production. • The Wheat Board will only operate in the market for non-contract requirements.

• Wheat for stock feed can also be grown under contract for up to 50 per cent of millers’ requirements. • Four grades of wheat will be established — number one milling, number two milling, N.Z. utility and N.Z. soft.

• Pricing pools by region will operate for the first two grades, Pools will be centred on Invercargill, Dunedin, Oamaru, Timaru, Ashburton, Christchurch, Blenheim and the North Island.

• Grading will be by cultivar and Oroua and Otane will be accepted into the number one grade from all regions. Kotare and Weka will only be accepted into the top grade when grown in Canterbury and North Otago. • The number two milling grade will be at a discount of 5 per cent to the number one grade and will contain Advantage and Rongotea from all regions, Takahe and Tiritea from Southland, Aotea from Canterbury and Southland plus No. 1 cultivars which have quality defects or which are grown outside the region specified for the cultivar.

• The N.Z. utility grade will contain wheats rejected for quality defects from the No. 1 and No. 2 grades and cultivars not designated as milling wheats. No price pooling arrangements will apply and the Wheat Board will be under no obligation to market wheat in this category during 1986. • The N.Z. soft grade will contain Karamu, Bounty, Arawa and Koparu grown under contract and if they are not grown under contract these wheats will fall into the utility grade.

• Wheat will not be accepted into the two top grades for handling by the board with more than 15.5 per cent moisture and wheat accepted with a moisture level above 12 per cent will be subject to weight dockage, • The test weight for the two top grades will not be less than 74kg per hectolitre. Below this figure wheat will fall into the utility grade.

• The wheat in the top two grades must be sound and sweet, free from smut, decay, damage by insect pests injurious to baking quality, and free from any other blemish or damage not acceptable to the purchaser. Again should wheat not conform it will fall into the utility grade.

• The milling grades must also have a minimum falling number of 250, on flour, and contain not more than 0.5 per cent by weight of weed seeds or more than 4 per cent by weight of weed seeds and other extraneous matter and broken, immature or shrivelled grains. • Wheat in the No. 1 milling grade containing less than 10.5 per cent protein on the wheatmeal at 14 per cent moisture may be downgraded to the No. 2 grade unless the board can sell it as No. 1 at a negotiated price.

• Bake tests will be carried out on approved samples of cultivars in the two top grades for the information of the miller and the Wheat Research Institute will grade wheat either undamaged (without heat or bug damage for example) or damaged and unsound whereby it will fall into the utility grade. • Payments for growers will be in a free on board (f.0.b.) basis and not free on rail (f.0.r.) or cost, insurance, freight (c.i.f.). • The f.o.b. basis will be the current Australian standard white f.o.b. price converted to New Zealand dollars with appropriate adjustments for quality and delivery at consolidation points named by the board.

• The “current A.S.W. f.o.b. price” is defined as the average of the daily A.S.W. prices quoted by the Australian Wheat Board for the current month of delivery converted daily to N.Z. dollars, at the exchange rate for the day, in the week preceding the delivery.

• Growers’ pools for two top grades will be established following negotiations between the board and United Wheatgrowers and it is expected that either a flat rate or fixed percentage of f.o.b. price will be paid as a first advance at delivery

with the balance paid at termination of pools but the amount varying according to the delivery times, movement of f.o.b. prices and the differences in regional pools. • Advance payments to growers will continue on a basis yet to be determined. • Utility and soft grade prices will be reached by agreement between purchasers and sellers.

• All contracted quantities must be advised to the board and it will arrange transport of contract wheat to mills if required.