December 8, 2020
PEI Grain Elevator Corporation Update
Once again for the 2020 growing and harvest season, weather conditions were major determinants impacting both the yield and quality parameters of crops grown by P.E.I. producers, and indeed, by all Atlantic Canadian growers. GEC currently handles significant volumes of milling and feed wheat, barley, oats, soybeans and more recently smaller volumes of dry corn at each of its three elevator locations. Fortunately for this year, there were no more hurricane like fall harvest conditions for corn and soybean growers to contend with. On that front, this past year, GEC collaborated with the Province of P.E.I, Atlantic Grains Council, livestock groups and the Provincial Federation of Agriculture to submit an Agri recovery application on behalf of impacted P.E.I. corn and livestock producers to the Government of Canada (A.A.F.C.). As of the date this article was written, GEC has not been advised that the 2019/20 application has been processed or approved. From the grower standpoint, it is regrettable that a timely approval process is not apparent. Given both the early supply chain interruptions, price negativity and volatility associated with C.O.V.I.D-19 this past year, an
uneventful routine harvest season was appreciated by all especially as harvest prices strengthened!
This past year was a growing season plagued with insufficient rain; at the wrong time but with adequate heat arriving for many locations. The result for all crops in which GEC deals were smaller yields, as well as lower bushel weights, and moisture levels; thus impacting drying charges in a positive manner with above average milling and feed quality parameters apparent across the board.
GEC cereal purchases increased by several thousand tonnes this year; primarily as winter wheat. This is a crop that is favored by farmers given that is a valued fall cover crop boosting soil heath and providing a source of income in the following year. Soybeans continued their decline although recent supply demand trends and higher prices make it an attractive crop for next year. Time will tell! Strong regional demand and excellent quality of both feed and milling wheat has led to stronger local prices. The milling, livestock and aquaculture sectors appreciate this as it reduces the sectors reliance on quality of products imported from other regions of the country. Corn volumes are down due to the dry weather, but the high yield/quality potential of modern varieties has increased grower interest in the production of corn as silage, high moisture and dry corn. GEC has recognized this shift and while its immediate requirement is to be in a position to handle soybeans, a market developed in response to grower interest, GEC has provided access to commercial drying facilities to offset growth of the sector and need for a drying and handling service. GEC continues to carry out its capital expansion plans. Updates and capital improvements to the Elmsdale and Roseneath facilities are now complete and fully operational. This leaves only the Kensington facility for storage increases of up to 1500 metric tonnes, upgrading and improved operational efficiencies. Recently the Board of Directors has ratified the project. General Manager Neil Campbell will oversee the work. Decisions have yet to made, with regard to the original facilities replacement as the Government of P.E.I is the owner. The GEC Board of Directors is in discussion with the Minister of Agriculture and Land as this article is being prepared. Increased storage capacity at all three elevator locations reduces island storage and handling costs. It also facilitates real time delivery for our customers.
As stated earlier, GEC has not been able to acquire sufficient quantities of feed grade soybeans for export by vessel which has increased reliance on local commercial trucking. Shipping opportunities to Quebec processors have continued. But the market has to deal with additional buyer competition and more local processing so the immediate need to address substantive export markets is diminished although forward contracting remains available for those growers choosing to lock in a forward price in a time of market volatility and uncertainty. The current trade war between China and the U.S. is not as pronounced, but carry over issues means that prices can change in a hurry!
Feed barley is still an excellent crop to grow although it faces more buyer competition from corn as a feedstuff due to its lower energy profile. As an offset, some local growers both in P.E.I. and Atlantic Canada are having success with the growth of barley for malt or, the barley pearling sector. Oat volumes remain stable. Quality is decent this year but oats as a feed stuff is primarily for the horse market or, as a lower energy higher fiber feed source. High freight rates have kept P.E.I. oats out of the Ontario market for human consumption.
It is arguable that our reliance on local feed markets is an advantage. It may immunize our region from some of the protectionist measures that other Canadian regions sell into as exporters. Local basis issues can partially offset the negative price impacts of global protectionism and technical trade barriers; apparent in trade agreements such as C.E.T.A. and C.P.T.P.P that have supposedly been ratified .Unfortunately we remain price takers in a world of growing protectionism. Additional challenges include imposition of the carbon tax, seasonal transportation weakness and higher freight charges which can distort markets even further.
In the meantime, GEC will continue its efforts to maximize grower returns through sales optimization and effective cost control. Stronger prices continue even with C.O.V.I.D -19; related to global weather trends as well as supply and demand relationships. Such trends are monitored by General Manager Neil Campbell and staff. Our unstated goal remains to be a more efficient, lower cost and higher volume handler and marketer. These objectives remain fundamental to the success of the business and our customers; both as buyers and sellers.
GEC also continues to support the Atlantic Grains Council through its efforts to collect the research levy, oversee projects and provision of policy support. General Manager Neil Campbell continues in his role as Vice President and sector representative for the Eastern Varietal Soybean subcommittee of the Canadian Grains Commission.
GEC is staying on top of new trends related to code of practice, public trust, and, sustainability in order to be export ready should the opportunity arise. New generation consumers are becoming much more interested in these topics along with climate change and carbon sequestration as time marches on.
Growers are reminded that quality matters for all crops in relation to servicing domestic & export markets. GEC staff is available to answer any marketing questions you may have as well as provide information and services related to risk management (futures& options trading).
The reader should contact General Manager Neil Campbell, Wade Waddell, Donald Stewart, or Joe Vandenberghe. They would be more than happy to address any issue on customer’s minds.
Here’s hoping all remain healthy and safe as together we face issues related to the “new normal” post the C.O.V.I.D-19 pandemic. The resiliency of the agriculture and agrifood sectors in terms of leading P.E.I & Canada in an economic recovery has not gone unnoticed. Neither has the role of GEC in terms of providing service to the sector deemed as essential. Good luck!