These days you can hardly read an article on business success without a reference to the importance of branding. But last week the federal budget confirmed what we reported in the last issue — the Canadian Grain Commission and its Certificate Final for export shipments are under review. That means that so is the brand for Canadian grain.
If you are looking for an example of successful branding, you will find none better than Canadian wheat. Among customers, it is hands down considered the best in the world. Farmers anywhere can grow quality wheat, but customers don’t buy from farmers — they buy from exporters who have bought the grain from thousands of farmers and combined it so that it can be loaded into vessels taking tens of thousands of tonnes at a time. Canadian wheat customers know that year in, year out they can buy a cargo of wheat and know the exact quality. In turn, wheat farmers know that the grain companies are paying them for the same quality as they’re delivering to the customer.
But all that depends on having a grading system run by an independent third party. Without the requirement that the Canadian Grain Commission certify the grade on the export shipment with a “Certificate Final,” there would no longer be a brand on Canadian wheat. Any quality guarantee would depend on the individual exporter, which in most cases is no longer a Canadian company. It’s a multinational which sources wheat from multiple countries.
As reported again this week, the need for a Certificate Final and the CGC itself are under review, in part due to pressure from at least one of those multinationals which also sources from others including the U.S., Europe, Australia, Russia, Ukraine and Kazakhstan.
So it comes down to this: does Canada want to maintain the brand on its wheat, or does it want to be among the countries competing to supply the multinationals based on their specifications once they’ve made an optional-origin sale?
The Canadian grading system is not a “regulation.” It’s a quality guarantee. Keep the CGC and keep the Certificate Final, or lose the brand.
Less canola or one less seller?
China’s apparent suspension of canola imports is the latest in a series of moves which have many guessing what’s happening in the market. But some may be guessing more than others, highlighting the need for more transparency in the Canadian grain-marketing system.
Have the Chinese decided to import less canola? Maybe, which explains earlier delays of shipment approvals — this has happened before as an excuse for reducing purchases due to logistical problems. But we can be fairly certain that the Chinese government has not decided to deprive its citizens of cooking oil and animal feed because it’s annoyed with Canada for detaining a telecommunications executive. Politics may have initially been a factor in singling out Richardson International as the largest Canadian exporter. But since then we’ve learned more about the extent of the swine fever outbreak in China, with some estimates that it will cut the hog herd by 30 per cent. A resulting cut in feed imports would have nothing to do with politics.
The odds are that China will be back sooner or later, and it would be nice if everyone knew at the same time. If there were a mandatory sales-reporting system like the one in the U.S., everyone would, just as they did last week when China surprised the market with a purchase of 300,000 tonnes of corn, the largest in five years.
While canola was never a wheat board crop, there were some vague hints that Canada could get such a system when the CWB ended in 2012. That could include weekly reports of export sales, information on the number and destination of vessels arriving in ports, and reports of actual prices received by farmers delivering in the country.
Seven years later, farmers are still waiting. The only pricing information is the Alberta Wheat Commission’s PDQinfo website, which only carries average price quotes from all elevator companies, and only on a few grades of wheat, canola and peas. There is no information on actual prices received on the elevator driveway. That information was published back in the 1970s when it was collected as part of the Western Grain Stabilization Administration program. That was when there were thousands of elevators, thousands of small deliveries in three-ton trucks, and computers were the size of shipping containers. Collecting it today would be a matter of a few clicks on grain company computers.
Reviewing a recent USDA report of actual prices received by farmers highlighted the stark difference between our two systems. It even reported pumpkin prices — by state — in addition to grains and oilseeds by class.
Canada may not need to go quite that far, but the changes to the wheat board were supposed to be a transition to an open market system. As mentioned above, the Canadian Grain Commission is under review. One of its recommendations should be that the federal government should be finishing the transition by giving the CGC authority to operate a U.S.-style market-reporting system.