At this writing, harvest delivered wheat may be forward contracted in Central Oklahoma and the Texas Panhandle for about $6.20. This figure is based on a June delivery basis of 50 cents less than the Kansas City Board of Trade July wheat contract price. The $6.20 price is before discounts are applied.
Concerns exist that because of last fall’s drought conditions, cheat, rye, and other weed seed did not germinate before the wheat was planted. The 2012 Oklahoma and Texas wheat harvest may have a dockage and/or foreign material problem.
When a load of wheat is delivered to an elevator, about a 1,000 gram (2.2 pounds) sample is taken from the load. The sample is used to determine moisture, dockage, test weight, percentage of foreign matter and other relevant grade factors.
Dockage is all material in the load that may be removed with screens and an aspirator. Elevators normally determine the percent of dockage by running a 500 to 1,000 gram sample through a dockage machine. Dockage is not a grade factor.
Foreign material (FM) is non-wheat material in a load of wheat that is not removed with screens and aspirator. Most elevators determine FM after the dockage has been removed by hand-picking the non-wheat material out of a 30-gram sample. FM is a grade factor.
When 2.2 pounds of wheat is used to determine the grade and discounts of a 60,000 pound (1,000 bushels) load, it is extremely important that elevator personnel obtain a representative sample. This result is accomplished by taking the sample from several locations with a grain probe.
Dockage is first removed from the weight of the load. Assume the dockage is 1.5 percent. The warehouse receipt would show 59,100 pounds or 985 bushels of wheat for the 60,000 pound load. The non-wheat material is not receipted as wheat.
Flour millers and foreign wheat buyers’ purchase contracts specify that dockage must be less than 1.0 percent. (Some contracts specify a maximum 0.5 percent dockage.) Thus, wheat with greater than 1.0 percent dockage must be cleaned. This cleaning fee is passed on to producers as a price discount.
Grain Elevators normally have a posted discount schedule. One elevator’s schedule has the following dockage discounts: Dockage 1.1 to 1.2 percent – 4 cents; 1.3 to 1.5 percent – 6 cents; 1.6 to 2.0percent – 8 cents; 2.1 to 2.5 percent – 12 cents; 3.6 to 4.0 percent – 18 cents; 4.1 percent and above – 2 cents for each 0.5 percent.
For the example load above with 1.5 percent dockage, the price discount would be 6 cents. If the local price is $6.20, the price paid would be $6.14 per bushel for 985 bushels of wheat.
Assume that the 985 bushels of wheat is 1.6 percent FM, such as rye. Remember that foreign material is determined after the dockage is removed.
The elevator’s discount schedule for FM is: 0.5 to 0.7 percent – 2 cents; 0.8 to 1.3 percent – 4 cents; 1.4 to 2.0 percent – 7 cents; 2.1 percent and above – 2 cents for each 0.5 percent.
If the 985 bushels contains 1.6 percent FM, the price discount would be 7 cents. Added to the 6 cent dockage discount, the total price discount would be 13 cents. The elevator would pay $6.07 ($6.20 - $0.13) for 985 bushels of wheat.
Discounts are also applied for test weight (normally starting at 57.9 pounds), moisture (above 13.7 percent), damage (including sprout), and shrunken and broken kernels.
Producers who have cheat, rye, or other non-wheat plants in their wheat fields have choices. They may use herbicides to control some non-wheat plants. The combine may be set to remove dockage in the field. Producers should determine the price discounts and select the choice that produces the highest profit.