Farmers can now deliver to the wheat board through 120 elevators across the West and more grain companies are expected to participate
Things are starting to look up for the Canadian Wheat Board.
Last week it announced six more grain companies will handle its grain making it practical for farmers across the West to patronize the board, and it announced a big wheat sale to Japan.
Until the new handling agreements were announced June 21 at the Farm Progress Show in Regina, some wondered if the “new” post-monopoly board would be dead on arrival Aug. 1.
Agriculture Minister Gerry Ritz, who had been trumpeting a “strong and viable wheat board” in an open market, conceded in an interview on CFAM last week the first year will be tough for the board. Grain companies want to secure as much grain as they can directly from farmers, but he said that was normal in business.
Tools to compete
When asked to comment further Ritz said in an email the government is committed to ensuring the board has the tools to compete in an open market and is sure the CWB will be “a strong and active player in an open grains market…”
The new agreements, which include Viterra, Canada’s biggest grain company, along with former deals with Cargill and South West Terminal, bring the number of elevators handling board grain to 120. Those facilities represent almost half of the West’s grain-handling capacity, but cover the entire region geographically, said Gord Flaten, the board’s vice-president for grain procurement.
Agreements were also struck with Mission Terminal, West Central Road and Rail, Delmar Commodities, Linear Grain and Agro Source.
It’s expected the agreement with Viterra will continue if Glencore International buys Viterra, board CEO and president Ian White said.
The board also expects to get handling agreements with all the other grain companies, including Richardson, Parrish & Heimbecker and Paterson, by month’s end, he added.
“CWB is ready to do business with partners who are committed to helping us serve Prairie farmers and their global grain customers,” White said.
“Farmers should now be able to move ahead and sign CWB contracts with confidence.”
Flaten also said the wheat board has struck a deal with Japan to supply it with 50 per cent of the Canada Western Red Spring wheat it will buy during the first half of the new crop year. Typically Japan buys a total of 800,000 to one million tonnes of wheat from Canada annually, he said.
“That’s definitely good for CWB and the farmers that participate in our pools,” he said. “That’s a good market.
“It’s a good deal for the Japanese because they want to make the transition very carefully as well to make sure they’re going to be well supplied.”
Sign up now
To take advantage of sales to Japan and other markets, the board is urging farmers to contract with its pools right away. Traditionally farmers don’t sign up until after harvest, but now the board must compete with other buyers. Before it can do much forward selling it needs to know how much grain it’s getting, Flaten said.
“There’s also no risk for a farmer to sign up early to these pools,” Flaten told reporters. “We have an Act of God clause that removes any of the risk for farmers… if they have a production problem like hail damage. They can also change their grades and switch to cash contracts.”
Farmers who delay might not get into the pools, especially the early pool that ends Jan. 31, White said.
Some companies will handle the board’s cash contracts and others won’t. Farmers who sell on a cash basis to the board can negotiate with different companies to handle the grain, Flaten said. The same applies to pooled grain.
“That gives (farmers) some market power to negotiate the best deal they can on handling and freight charges,” he said.
White said the handling agreements took longer than predicted because they are new and complex, he said. He declined to say how much market share the board expects to earn.
The board will soon announce its initial payments, White said. In the past they’ve been about 65 per cent of the expected final return. But the new CWB hopes to offer a higher initial payment. The government will guarantee the traditional initial and the board will look at ways to cover the rest.
Producer cars will be a big part of the board’s new business, Flaten said.
“We have a special contract for them and we expect to be able to handle a large number of tonnes through producer cars.”
The board won’t rule out sending producer cars to Churchill, but it’s unlikely, he said. Timing producer car arrivals and grade fluctuations make producer cars more difficult to handle at smaller ports, Flaten said.