Staff say the more grain it gets the closer it can get to providing the benefits of the soon-to-be-dismantled CWB
The tiny village of Somerset was shrouded in fog March 30, not unlike the outlook for Western Canada’s new open wheat and barley market.
More than 80 farmers made their way through the morning mist to hear about the CWB’s new pricing options, which includes two pools and cash offerings. It was the last in a series of CWB information meetings held across the West last month. The day before the CWB started offering new crop prices and contracts. (See sidebars page 18 ).
Farmers know federal legislation, being contested in court, will create marketing freedom Aug. 1. But there’s uncertainty about grade and protein discounts, the economics of producer cars, the impact of railway power over car allocations and how competitive the new CWB will be.
Three of the four farmers named in the successful Friends of the Canadian Wheat Board Federal Court case that ruled Agriculture Minister Gerry Ritz broke the law by introducing legislation to kill the CWB’s monopoly, are from this area, and all four were here.
So was former CWB District 10 director Bill Toews.
Perhaps that’s why CWB president and CEO Ian White began by emphasizing the meeting would focus on the new reality — the CWB’s monopoly over the sale of western Canadian wheat and barley destined for export or domestic human consumption is ending.
“Our success at the end of the day and our success in being able to do some of the things that we used to do for the industry is largely dependent on you and whether you’re prepared to support the CWB,” White said. “And we recognize that we’ve got to provide you with value in a competitive sense if you do that.”
Ian Robson, Deleau farmer and Manitoba co-ordinator for the National Farmers Union complained several times that under an open market CWB services will cost farmers more and return less.
CWB staff didn’t deny it.
“I think the pool can be strong the more participants there are in it and the more tonnes that are in there, but it’s certainly not the single desk,” Neil Townsend, the CWB’s North American market analyst said.
The CWB wants to work with producer cars, but it will be more complicated in an open market because the uncertainty of car deliveries.
The CWB will focus on servicing high-paying customers like Japan, but in an open market other companies can undercut the CWB for that business.
“I think guys are starting to recognize what we’re losing,” local farmer Norbert Van Deynze said following the meeting.
“I sense the disappointment among some of you about the way things are unfolding here,” Townsend said. “I’m disappointed as well. I worked at the wheat board (then left to work for Cargill). I came back to the wheat board because I liked what the wheat board stood for and all that. But things change and we’re not in control of everything.
“You will have to adapt to this new world as much as you maybe don’t like it.”
The more grain farmers commit to the pools, the more successful they will be, according to Townsend.
“That is indisputable because the averaging and the power of selling is also important,” he said. “I think the most critical thing for the CWB going forward is to have tonnes in the pool.”
Pooling guarantees “a good average” return and is the cheapest form of risk management, he said.
Less than average
In the United States 70 per cent of the grain is sold by farmers for less than the average price, Townsend said.
Minneapolis wheat futures contracts peaked at $24 a bushel in June 2008, but only one contract was sold at the high, he said. North Dakota farm gate prices averaged $7 a bushel that year. (The CWB wheat pool averaged $8.57 a bushel at a Manitoba elevator, according to the CWB’s 2007-08 annual report.)
In an interview following the three-hour meeting Toews complimented White and other CWB staff.
“Ian and these guys are professionals and they will do what they can to make this work, but I think the odds are stacked against them,” Toews said. “If you think of it in terms of a poker game the only card they might have is a one-eyed jack and the other grain companies have the aces.”
Toews said he isn’t likely to commit grain to the CWB’s pools.
“I will be perfectly content to do my own pooling because there is nothing about the wheat board pools that will be more than averaging,” Toews said. “In the past there was always the ability of the single desk to attract more by differentiating markets and by price premiums.”
Manitou farmer Rob McLean said he’ll likely do some business with the CWB, including its pools, but added he’s comfortable selling in the cash market.
“I think it’s early and they’ll need time to prove themselves,” he said.
“There are still lots of unanswered questions.”
When farmers left many were still pondering the future, but the fog had lifted, the sun was shining and an early spring was in the air.