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Co-operating with its competitors

Attendance was down at the annual Canadian Wheat Board breakfast at Ag Days this year, but the farmers who came were encouraged by what they heard.

“That just made my day. Now we have a choice,” said Jake Hofer, a wheat producer from Treesbank Colony after listening to a presentation by Gord Flaten, the board’s director of marketing and sales.

“I’m very encouraged, my whole feeling is something happened that was very good today. Now we have a choice,” he said.

Hofer was among the 75 or so farmers who attended the annual breakfast, about half of the usual crowd, which has in the past had to turn farmers away because of lack of space. But the CWB event coincided with a breakfast hosted by Cargill on the other side of town. As well, a misprint in the Ag Days show guide resulted in a number of farmers arriving the previous day to find the doors locked.

While stressing many of the operational details must still be ironed out, Flaten said there is an opportunity for the new board to be a competitive option for farmers on the Prairies and elsewhere.

But he said it’s really up to farmers to ask themselves whether they want it to continue and whether they believe in it enough to participate in making that happen.

Flaten said it has experienced staff with strong connection with customers who continue to want to source grain through it. “We need to be competitive, but they prefer doing business with us, all things being equal.

“There are a lot of farmers who trust the CWB and find value in the services that it provides,” he said.

The missing link is the board’s access to grain handling and transportation, he said. “You can’t deliver your grain to a CWB elevator.”

But he said the board is optimistic it will be able to negotiate contracts with grain companies.

“Grain companies need volume and we can bring them more than they can get on their own,” Flaten said. Plus the board is capable of helping the private trade develop marketing plans because of its intimate knowledge of customer preferences. Plus customers have confidence in the board’s ability to deliver the quality and quantity they require.

Thirdly, the board’s access to low-cost financing will work to reduce the operating costs of its grain company partners, he said. “We are confident this last piece of the puzzle will fall into place,” he said.

Flaten said the board will generally be offering farmers four pricing options in the new marketing environment. It plans to offer harvest pools for CWRS, durum, winter wheat and malt barley, which would operate similar to today’s pooling system but with a limited signup window.

It will also offer a pre-harvest pool with either a pre-seeding or pre-harvest signup window. These pools would likely operate under a four-month marketing period between harvest and January. A third option would be a futures option, which would operate similar to existing hedge-to-arrive contracts currently available in the grain trade. And it will offer a series of cash contracts.

Flaten said the federal government has assured the board it will enter the open market with a clean balance sheet, access to the previous board’s contingency fund and control of its existing assets. “It means that we will be starting operations with a significant capital base,” Flaten said.

The board has also been assured the federal government will continue to guarantee its borrowings, which allows it to obtain financing at lower interest rates and there will continue to be guaranteed initial payments on the pool accounts.

Those two factors will significantly reduce its operating costs, he noted.

As well, the board will be free to market crops beyond its current mandate as well as grain originating other countries.

Flaten said one of the biggest reasons for farmers to continue marketing through the board is to ensure there continues to be lots of competition for their grain.

The board is a statutory corporation, which means it is owned by the federal government. That was the case before, except prior to Dec. 15, 2011 it was governed by a board controlled by farmer-elected directors. Now it is governed by five federally appointed directors. Eight farmer-elected directors were fired last month. Two had previously resigned.

The government has indicated it will be privatized within five years so farmers need to be thinking about what structure they want to replace it, whether it is a co-operative or shareholder model, Flaten said.

Flaten couldn’t say when its partnerships with grain companies would be in place, or when it could begin offering contract options. Some grain companies have already begun offering new crop contracts to farmers.

As well, he said in an interview, that while the board will continue to work with producer car shippers, its ability to blend those cars into its shipping programs will be reduced because its volume of handle is expected to decline.

That means it will need more predictability from shippers on the quality of grain they are shipping.

Newdale farmer Gary Andreychuk said he hopes the board works through the media to get its message out to other farmers. “After your presentation, I feel very confident in contracting with you,” he said. “I found this very informative.”

Hofer agreed. “I didn’t know they had done so much work. I was afraid it was going to fall apart,” he said.

But when asked whether he’d be selling through the new Canadian Wheat Board, Hofer would only say he is keeping his options open.

About the author

Vice-President of Content

Laura Rance

Laura Rance is vice-president of content for Glacier FarmMedia. She can be reached at [email protected]

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