Farmers probably would not have delivered much more grain under the former wheat board’s single desk this crop year, but they would be billions of dollars richer, according to a former CWB elected director.
Ian McCreary, a farmer at Bladworth, Sask. and a former CWB staff analyst, said that’s because farmers would not be losing more than $100 a tonne in the basis — the difference between the price at port and at country elevators.
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“One hundred per cent of that would’ve stayed in farmers’ pockets under the wheat board,” McCreary said in an interview following a University of Saskatchewan meeting on grain transportation.
“That’s why (Agriculture Minister) Gerry Ritz is hammering the railways, because he needs to make this look like a railway problem and it’s a marketing problem. Any time your basis is out of line by over $100 a tonne, it’s a marketing problem.”
The old wheat board would have agreed to take delivery of a portion — 70 or 80 per cent — of the 2013-14 wheat crop and the rest would be stored on farm, McCreary said. Farmers would complain, but the stored grain would be removed from the market and the wheat basis would be closer to normal, he said.
From the Grainews website: Guenther: Farmers’ cash flow concerns feeding wide basis
McCreary said the canola basis would also be narrower because the wheat board took canola and pea shipments into account when calculating grain movement. More capacity for non-board crops results in a reduced basis for those crops, he said.
The single desk is gone, but there are lessons from how it co-ordinated grain logistics, McCreary said.
Almost all western Canadian grain wants to flow to the West Coast because that is where the price is highest, McCreary said. But Vancouver and Prince Rupert can only handle around 22 million tonnes — or half the exports.
That constraint also contributes to a wider basis. The wheat board dealt with it by allocating what it could to the West Coast and the rest to other export corridors. That cost an extra $10 to $20 a tonne, but it was shared equally among farmers in the pool.
Western Grain Elevator Association executive director Wade Sobkowich said it’s wrong to assume grain companies are capturing windfall returns due to the wide basis.
“The grain we’re taking in now was contracted months and months ago (at higher prices),” Sobkowich said.
Meanwhile, grain companies are facing higher costs for demurrage — an estimated record $55 million so far — and paying contract extension penalties and losing sales, he said.
