If you didn’t read Phil Franz-Warkentin’s article on calculating basis on page 11 last week and don’t still have a copy, you can find it by going to our website and searching for “muddied.”
That word appropriately describes the voodoo combination of futures and exchange rates that Prairie grain companies use to calculate their published cash prices for wheat. If you look at recent quotes, you’ll see that No. 2 CWRS is 22 cents a bushel over the Minneapolis future. That certainly sounds better than last year when it was a buck and a half under, and makes it appear that the grain company is being pretty generous.
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What it more likely says is that the cash bid has nothing to do with the futures. The companies might be using futures to protect themselves from price fluctuation, but not necessarily to set the price in the country.
It’s more likely that they are doing as any business would. They know (a) the price at which they can sell to the customer, and (b) the cost of getting the grain from the country to the ocean vessel plus whatever they can add for profit. The difference between the two becomes the elevator bid.
As noted in the space before, and by many others analyzing the market, the change to the Canadian Wheat Board’s monopoly left Western Canada with a U.S.-style marketing system, but without the U.S.-style assistance to give farmers their fair share of market information.
U.S. exporters are required to report major sales within a week. The USDA has staff to gather and publish daily export prices at the major ports. It publishes monthly averages of actual prices received by farmers in each state.
It seems that Minister Ritz is starting to get the message about this discrepancy, based on his recent announcement of almost $743,000 to the Alberta Wheat Commission for its “Price & Data Quotes (PDQ) project.” It’s being developed in conjunction with FARMco, a private marketing advisory service run by Winnipeg’s John DePape. The objective is to have a website where farmers can find “market-related data.”
Good start, but will the operators of initiative have any teeth? The grain companies aren’t going to part with sales information unless they’re required to. Farmers also need timely information on car supply by area — will the companies and railways part with that?
As for actual prices received by producers, we know getting them is quite doable. That’s what was collected and published back in the days of the Western Grain Stabilization Administration — before computers in the elevators. It would be much easier now — if the companies were required to report it.
The PDQ project is a start, but if it can’t obtain enough useful information, let’s hope the operators let Mr. Ritz know that he’ll have to take this another step and put some teeth into the process.
A job for the senators
The initiative to improve access to market information is another indication that the changes to the wheat board led to some unintended consequences. Even supporters of the change agree with that, especially when it comes to the ongoing transportation schmozzle.
Discussing those consequences in advance was out of the question, at least as far as the government was concerned. If you supported the wheat board monopoly, you were an anti-progress, stuck-in-the-past lefty. End of story. No discussion allowed.
There’s an element of that attitude when it comes to changes to Plant Breeders Rights legislation as a consequence of Canada joining UPOV ’91, the international convention on breeders’ rights. When Minister Ritz announced the decision last year, there was a virtual blizzard of press releases from organizations anxious to show the government they were on side by announcing they had joined an organization called “Partners in Innovation” to support it.
Joining UPOV ’91 may well be the right decision but that haste may have allowed the devil to hide in the details. The government did acknowledge that it’s OK to be a little bit worried about the ability to save seed, and Minister Ritz was at pains to emphasize that the “farmers’ privilege” would be protected.
But to save seed how and where, exactly? That seems to be in question, based on lawyer Robert Watchman’s presentation to the KAP annual meeting. It turns out that the definition of the ability to “condition” or “stock” seed is at the least vague if not completely absent. That will be defined in regulations, which we haven’t seen — and which can be changed.
The “Agricultural Growth Act” (who could be against that?) containing the changes has yet to pass the Senate. Its committee discussions are often much more reasoned and non-partisan than those in the House of Commons committee. Before passing the bill, the senators should call some witnesses to help clarify these questions.
