Single wheat buyer in the South Island milling wheat market

Change is on the horizon for South Island milling wheat growers, as a second major milling company changes its procurement policy.

This at a time when the arable industry works together to increase tonnages of domestically produced milling wheat.

Traditionally, if a grower wants to produce milling wheat, they secure a contract from a milling company or contract through their preferred grain merchant who sells it on their behalf. While this process has its flaws, namely around price, it has worked for all parties involved.

So why change something that isn’t broken?

In 2020, Federated Farmers was notified by the first major milling company that they were changing their milling wheat procurement policy. Instead of using the traditional system, they were now contracting an external company to seek South Island milling wheat tonnages on their behalf.

In March 2021, Federated Farmers was indirectly advised that a second major milling company was now contracting the same external company to seek tonnages of South Island milling wheat on their behalf.

This now means that this external company has responsibility for procuring up to 80 percent of the domestic milling wheat.

Federated Farmers is seeking clarification on the new processes this external company will be undertaking and from the two major milling companies on the rationale behind the decision making.

While the external trading company has committed to using domestically produced milling wheat, this is cold comfort for growers who are rightly concerned that it could be a pathway for increased imports if the domestic price is not right.

The decision of the milling companies is even more perplexing when you consider that the arable industry stakeholder group, the Arable Food Industry Council (AFIC) started an initiative in 2019 to increase the area of milling wheat produced in New Zealand. Growers, merchants, and milling wheat companies were supportive of the initiative, which also looked at working with the major milling companies to ensure contracts and options were in the market earlier to provide growers with options and information to make informed planting decisions.

Federated Farmers encourages growers to discuss the changes to the milling wheat procurement system with their local merchant or the mill directly. We will continue to seek clarification on the rationale behind the decision making and, if necessary, take further action with the Commerce Commission.