Economists agree key to a successful open grain market is, well, openness, which includes easy access to accurate market information such as cash prices.
To that end the Alberta Wheat Commission (AWC) launched the first phase of its free, new web-based Crop Data and Price Reporting initiative Sept. 8.
Price & Data Quotes (PDQ) aims to be “a complete and unbiased” source for cash grain prices and crop data for farmers, the AWC said in a news release.
The days when farmers could get Manitoba Pool’s daily street prices on the radio are long gone. They were a guide as to what markets were doing and a benchmark by which to compare before selling.
A number of market analysts and newspapers, including this one, publish cash grain prices based on a survey of buyers, but some contend the current system isn’t transparent enough, especially since the Canadian Wheat Board’s monopoly over western Canadian wheat and barley destined for export or domestic human use ended Aug. 1, 2012.
“Since the end of the wheat board single desk we’ve seen an evolution in farmers’ marketing practices,” AWC general manager Tom Steve said in an interview.
“What are the (information) gaps and how do we fill them?”
The PDQ service electronically collects daily bids for five crops — No. 1 Canada Western Red Spring wheat 13.5 per cent protein, No. 1 Canada Western Amber durum wheat 13.0 per cent, No. 1 Canada Prairie Spring Red wheat 11.5 per cent, No. 1 Canola and No. 2 Yellow Peas — from major buyers across the West and then calculates an average price for nine geographic zones, including western and eastern Manitoba.
- More on the Manitoba Co-operator: Historical western Canadian cash grain prices available for a fee
While the Western Grain Elevator Association facilitated discussions with its members, there is no formal agreement between the association.
“Each individual company provides the information at their option,” said John De Pape of Farmers Advanced Risk Management Company, the firm contracted to build the service.
The site also provides futures market closing prices, average wheat grade and protein spreads, local weather, foreign exchange rates and deferred elevator grain prices.
Future versions of PDQ will be customizable, include charting capabilities and calculate the basis — the difference between futures and elevator prices — adjusted for differences in currency. More crops will likely be added too.
The new PDQ service received almost $743,000 in funding through Agriculture and Agri-Food Canada’s AgriRisk Initiatives under the federal-provincial Growing Forward 2 program.
Some companies that sell grain-marketing information to farmers have complained PDQ is unfair government-subsidized competition. De Pape disagrees.
“The objective of this was never to compete with people who are already doing this, but there is no one out there doing this,” he said. “There are people who collect prices and distribute them, but there are distinctions. I would say ours (numbers) are very robust… ”
PDQ’s prices are more accurate, according to De Pape, because the major buyers have agreed to automatically provide them electronically from all their elevator locations. The buyers know competitors will not find what their specific price is because they’re averaged.
“Any time you ask for a price you run the risk that they’re not going to be totally honest,” De Pape said.
“Our basic maxim is price, at a certain level, is a public good. I don’t think we as an industry should rely on two or three or four private enterprises to provide that public good unless they are willing to go the full nine yards.”
Farmers buy marketing information for analysis and advice, as well as information such as production and stock estimates and futures prices available free elsewhere, De Pape said. Just as analysts include futures prices in their publications they can publish PDQ’s cash prices too and for no charge, he added.
As useful as PDQ’s prices will be, they remain elevator bids, De Pape noted. Farmers should still contact several buyers before selling their grain.
“We know that a lot of business goes on at prices other than the bid,” De Pape said.
Sometimes an elevator needs a little extra grain to fill a train and offers a premium for a limited time or to certain customers. A buyer might pay a premium to attract a new customer.
PDQ is the only service reporting deferred cash prices up to 12 months out, according to De Pape. They are an important price signal, he said. If the cash price today for yellow peas is $6 a bushel but the May cash price is $6.56, that means some farmers can make money selling the peas today for delivery in May, he said. If today’s cash price is a lot higher than a deferred price that’s a signal to sell and deliver now.
The website just launched is version 1.0. There will be revisions, Steve said. In the meantime, the AWC wants farmers’ feedback on improvements ([email protected]).
“This is for the entire industry,” Steve said. “We would encourage everyone to weigh in on it. We’re trying to build a platform that has the broad support and consensus of the industry.”
Government funding for the project ends next spring. The AWC will prepare a report, including recommendations on how to operate and fund the service — a decision that’s up to the federal agriculture minister, Steve said.
One option is for Ottawa to continue funding the service and seek tenders for its operation as it does now for monitoring grain transportation. Another is for Canadian farmers, through their commodity groups, to fund it, Steve said.