Innovating Canada’s Wheat Supply Chain

Farmers choice isn’t wheat first

Over the past 25 years, wheat acres have been declining. With little influence on the price they receive for wheat, farmers could be encouraged to grow higher yielding wheat varieties with improved weed control options. Higher yields result in great profits, which can lead to more acres planted. From the students’ research they determined that if hybrid wheat could be commercialized with yield increases of 5-20%, this would incentivize farmers to increase wheat production. Additionally, making wheat herbicide tolerant would reduce input costs, further increasing the attractiveness of wheat production.

Should wheat breeding continue under Public or Private?

In spite of yield increases of 3% per year since 2000, compared to 1.25% in the 1980s and 90s, fewer acres of wheat are being planted. Given this, this group suggests that the development of Canadian western spring wheat (CWSW) varieties, which accounts for the vast majority of wheat acres, be taken over by private breeders so that additional traits, such as herbicide tolerance, can be included. Public breeders could pivot wheat development into new trending markets, such as white wheat varieties, which have a rising demand for the Asian soft noodle market.

According to Dr. Gray et. al, the private sector invests about 20% of what is publicly invested in wheat breeding, $6 million versus $33 million. Private sector developed varieties represent 5% of the CWRS acres seeded. To improve private investment, the students suggested that end-point royalties (EPRs) could incentivize private breeders to increase variety investments. Australia has adopted EPRs as a way of successfully funding their wheat breeding programs. Funding from EPRs could help lead research into higher yielding varieties, which would help to offset the higher royalties farmers would be required to pay.

You can grow it, but who will move it?

The students investigating the grain handling and transportation section identified numerous issues but focused on one solution, the interswitching or joint running rights of railways. Given that two firms control the majority of rail transport in Western Canada, allowing access to rail networks, opening up competition could increase wheat export capacity by 35% utilizing the existing system. Presently when a boat is waiting to be loaded, farmers pay this cost, even though they have no ability to control wheat transportation. Allowing American railway companies to have interswitching rights puts pressure on Canadian railways to increase on-time wheat deliveries, lowering the costs farmers pay to ship wheat.

Grown in the West, processed in the East

While Western Canada produced 95% of Canada’s wheat in 2017, milling and processing facilities are largely located close to large urban centers, in Eastern Canada. It’s also cheaper to ship a raw product than a finished one[1], that’s why the student’s suggestion was to integrate food and energy production. The waste that comes from milling and food processing can be utilized for ethanol production. By establishing more Canadian milling and processing opportunities alongside ethanol production, there could be a greater demand for wheat and potentially higher producer prices. Such a model of food-energy integration has already been successfully proven by the Manildra Group in Australia.

Not all ideas or innovations are equal

The students identified numerous opportunities, yet while there were all great innovations and ideas, they raised further concerns:

• If acres and yields increase, how will an already struggling rail industry be able to timely move higher volumes of grain to port?
• Private breeding higher seed prices might deter farmers from growing wheat.
• Farmer backlash to the inclusion of EPRs, they might not value the benefits greater than what they pay in royalties.
• Interswitching will lead to larger inland grain terminals, resulting in fewer delivery points, causing farmers to have to truck their wheat further.
• What if innovations are implemented, but demands for wheat doesn’t increase?

These students were given a challenging assignment, how to innovate an entire ag commodity industry. This is something our agriculture industry has to ask themselves if they wish to regain the title of the breadbasket of the world. As my students learned, the wheat supply chain hasn’t changed dramatically over time, and innovation is needed. There won’t be a single solution to increasing either wheat acres or the value-added aspect, rather a multi-pronged approach will likely be required.

[1] In 2017 Statistics Canada estimated that Canada would produce 22.4 million tonnes of wheat, while that same year Canada exported 20.7 million tonnes of raw wheat (including durum) and only 360,000 tonnes of wheat flour.