Pulse Industry

Feed Pea Benchmark

Alberta Pulse Growers - Feed Pea Benchmark

Western Canadian Feed Pea Benchmark - Backgrounder

Pulse Canada began publishing feed pea benchmark prices for Alberta, Saskatchewan and Manitoba in January 2009. The benchmark prices are intended to be used as a pricing reference for buyers and sellers of feed peas and to provide an indication of the "feeding value" of peas. The benchmark prices represent the price at which peas start to become an economically feasible feed ingredient for swine. The reason swine are used to determine the benchmark is that most of the peas fed in Western Canada end up in swine diets. The benchmark prices are a transparent, unbiased and reliable pricing reference for the industry.

The purpose of this backgrounder is to provide an explanation of the rationale, mechanics and potential uses of the feed pea benchmarking system.

What Is The Feed Pea Benchmark Price?

The feed pea benchmark is simply a pricing reference that can be used by market participants when trading feed peas. Price discovery for feed peas has often been lacking in Western Canada and the feed pea benchmark prices are one step toward enhancing the price discovery process. Each week, the benchmark prices provide an unbiased estimate of the intrinsic feeding value of dry peas in Central Alberta (Red Deer & area), Central Saskatchewan (Saskatoon & area) and Southern Manitoba (Winnipeg & area).

It is not expected that feed peas will trade at the benchmark prices, but rather that they will trade at various differentials to the benchmark price based on local supply/demand, quality differences and other contract terms. This can be thought of the same way as canola trades at a basis to the futures, or the way cash crude oil prices in North America trade at a basis to West Texas Intermediate crude.

How are the feed pea benchmark prices calculated?

The benchmark prices are generated from a standardized least cost feed formulation for swine that is typical of what is currently used in Western Canada by the major hog producers. The benchmark price represents the price at which peas start to become an economically feasible feed ingredient for hog producers to include in their diets.

Tradable prices of the major feed ingredients are collected from Central Alberta, Central Saskatchewan and Southern Manitoba. These prices are then entered into the benchmark least cost feed formulation. A feeding value is then derived for feed peas based on their nutritional characteristics and the prices of the other competing feed ingredients. For those familiar with least cost feed formulations, the feed pea benchmark price is simply the "shadow price" or "dual value" of peas, which is the price at which they would enter the swine ration.

The least cost feed formulation used to calculate the benchmark prices was developed in consultation with the Prairie Swine Center and the Feed Pea Network. The benchmark feed formulation will be reviewed on an annual basis by the Feed Pea Network to ensure that it is appropriate and representative of the current feed formulation methodologies. The feed ingredients included in the formulation are feed barley, feed wheat, corn, canola meal, soybean meal, canola oil, synthetic lysine, synthetic methionine, synthetic threonine, mono-dicalcium phosphate, limestone, salt, vitamins and minerals.

An important characteristic of the above methodology is that it provides a consistent benchmark value, using the same methodology each week to collect the prices of competing feed ingredients and to calculate the benchmark prices. While you may not always agree with the prices being used for the competing feed ingredients, they are collected in an unbiased fashion using the same methodology each week. Therefore, the week to week change in the feed pea benchmark prices should track price changes in the major feed ingredients, even if the absolute prices levels are somewhat different in your region.

How can I use the benchmark prices?

The feed pea benchmark prices are intended to be used as a pricing reference to enhance the price discovery process. The benchmark price can be used to assist buyers and sellers in arriving at a fair price that is representative of the intrinsic value of the product. It should be noted that the benchmark prices relate to the feeding value of peas only, and have nothing to do with the potential value of peas in the edible market.

As market participants become comfortable with the benchmark prices, they may decide to enter into contracts that use the benchmark as a pricing reference, similar to a basis contract for canola. For example, a producer may agree to sell a certain quantity of feed peas each month to a local hog producer at a specified premium or discount to the weekly benchmark price for their region.

What is a Pulse?
Recipes
Canadian Pulse Suppliers
Upcoming Events
Pulse Industry Food & Health Environment News + Multimedia About Us Privacy Policy Home
  Copyright © 2017 Pulse Canada. All rights reserved.