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More Discount Details Emerge by Scott A. Yates Capital Press, June 6, 2003

Northwest Hard Red Winter Hit; Columbia Changes Dockage Discount in Palouse

SPOKANE -- As harvest progresses across the region, grain exporters and local elevators fiddle daily with their discount schedules.

There's good news for growers in the Palouse region who market wheat through the Port of Wilma and Central Ferry (both on the Lower Snake River), where Columbia Grain International has reverted to a graduated dockage schedule. But there' bad news for those who grow hard red winter wheat in the Northwest, with two exporters imposing new levies against the troubled class.

Announcement of a change in dockage standards out of Columbia Grain's Whitman county facilities may represent a crack in the discount schedule recently adopted by all exporters. An e-mail from the company on July 22 reads: "You've spoken and we've listened. In an attempt to add some incentives for cleaner wheat, CGII adjusted our dockage discounts."

The new schedule, effective immediately - but only within a specific area -- will cost growers 1 cent per bushel for 0.2 to 0.3 dockage, 3 cents per bushel for 0.4 to 0.6 dockage and 4 cents per bushel for 0.7 to 1 percent dockage.

The discount schedule remains 4 cents per bushel between 0.2 and 0.6 dockage elsewhere.

Meanwhile, CLD Pacific and Harvest States are imposing flat discounts for hard red winter wheat with Northwest origination.

According to reports, CLD Pacific is imposing a 9- to 10-cent per-bushel discount on hard red winter wheat originating from Washington, Idaho and Oregon. Harvest States is imposing a 4- to 5-cent discount for the class. It does not appear Columbia will join in the discounting.

The decision to discount hard red winter is not entirely unwelcome by the wheat industry, but the timing certainly is. To have these changes imposed in the midst of harvest across much of the region is considered bad form at best.

Tammy Dennee, executive vice president of the Oregon Wheat Growers League, said the timing on the hard red winter discount is "pretty unfortunate" with farmers in her state wrapping up harvest.

"I would have been more pleased if the exporters had something about this last fall. Everybody would have been more please," she said.

Tom Mick, chief executive officer of the Washington Wheat Commission, said he was disappointed by the blanket discount on all hard red produced in the region, since there a varieties that meet minimum quality requirements.

He'd like exporters to figure out how to segregate higher-quality varieties while keeping the poorer ones out of the more developed markets of Japan, Korea and Taiwan.

"The reason the exporters are giving is they don't have confidence that segregation can be handled up-country. I've talked to a couple of elevator operators who say that is true," he said.

Like Dennee, Mick said the timing of the announcement on hard red was discouraging. He suggests that alone will create bad will between the exporters and farmers since it throws into disarray farmers' revenue expectations and, potentially, return from government programs.

The current situation was set up by the shipment of four cargoes of hard red winter wheat to Japan in the summer of 2002. Although the wheat met Japanese grade specification, it performed poorly in products.

Damon Filan, manager of Tri Cities Grain, which takes in large quantity of hard red winter wheat, said his company has sent down multiple samples of the first 400,000 bushels intake to the Wheat Marketing Center. He wants to have its functionality checked through baking tests, suspecting this season's environmental conditions may have improved quality.

And he believes growers have responded to alarms made over the past several years by planting less acreage of questionable varieties, like Estica and Symphony. So far, Tri Cities Grain isn't discounting its hard red winter intake.

Another elevator manager, who didn't wish to be identified, questioned whether discounts in the ballpark of 5 to 10 cents per bushel would actually have much of an impact on growers.

On July 22, hard red was trading at an 18-cent premium over soft white. Add in the 30 percent yield boost some hard red winter varieties get over soft white and "I'm not sure the discount is severe enough," the manager said.

Yet another elevator manager, in the hard red wheat growing region, suggested exporters may be having a knee-jerk reaction. Last year's Japanese cargo was partly set up by a drought-plagued Montana hard red winter wheat crop and the lack of an ability to blend.

That shouldn't be a problem this year.

"My hope is maybe there is an overreaction going on and that the scales will begin to narrow as fears are alleviated," he said.