Think outside the bin

[Burbert]

We all know that the lack of co-operation, co-ordination is what holds farming, back, in the dark ages. Always has and always will. Farmers will never be anything important, until these issues are solved. We need like a cartel,like OPEC (FPEC) to control food supplies, then we'll get the prices that we deserve. The governments around the world, however will never ever allow such an entity to exist!! So cheap food flows to the world as always.....

[chaffmeister]

Ado:

You got me – you’re right, there is a finite amount of wealth. Poor choice of words on my part.

Single desk supporters believe there is a limited amount of wealth and it come down to an us-vs-them attitude. Glad to see you say it could be bigger – in my view, the single desk is a huge impediment to making it bigger at the farmer’s expense. Go to www.wheatmontana.com to see what an unbridled entrepreneur can do.

Might have my history wrong but I thought the first board (the Board of Grain Supervisors) was established during WWI, not before. Rather than remember why the original board and its predecessors (provincial coops and pools, etc) were established (as Cottonpicken suggested) perhaps its more important to explore why they’re gone.

Local processing – its logical for farmers to be involved in processing. Look at Ocean Spray.

[dmlfarmer]

I agree with everyone seeking more value adding and local processing of our grains. Value adding and local processing is needed and benefits everybody.

However, with the demise of our beef and pork industries we have lost more value adding than we will every gain by building malt and/or pasta plants.

Until we are willing to examine, understand, learn, and then change the system that enabled our livestock system to be hijacked, we are doomed to repeat the same mistakes on any furture endevors we attempt regardless if it is board or non board grains.

Unfortunately, grain farmers are being led by the nose into the same trap that sealed the fate of the livestock sector. Until we learn from the past we are bound to repeat the same mistakes.

[Fransisco]

Cotton said- "My farm was growing wheat before the board,the reasons it was brought in should not be forgcotton."

Here's a little history then from the WheatBoards own website.

"War rapidly changed the demand for grain from Canada and affected the grain markets in the early 1940s. The United States, now the world's largest grain exporter, was actually Western Canada's biggest customer for wheat and feed grains in this period. Along with an increased demand for wheat in Britain and North America came escalating wheat prices on the American and Canadian grain futures markets. The Canadian government was committed to a policy of price control during the war years and the rising wheat prices created new problems for this policy and for its desire to provide food aid to its European allies. The CWB, still a voluntary agency, could not source wheat in a rising market since Prairie farmers were more inclined to deliver their wheat for the higher spot market prices offered by the private traders than for the CWB's initial payments. Canadian commitments to deliver wheat to its allies were put in jeopardy. It became obvious that some action would have to be taken to secure wheat supply to meet wartime obligations. In September 1943 the federal government halted wheat futures trading on the Winnipeg Grain Exchange and made the Canadian Wheat Board the sole authorized receiver and monopoly marketer of Western Canadian wheat."

And guess what even though the war is long over the Board is still supplying cheap wheat to the rest of the world. Talk about sharks, the Boards the biggest one.

[Fransisco]

DML you're right, and the grain sector is just starting to get a taste of whats been going on in Cattle and Hogs with Canola in China and Flax in the EU right now. We need trade agreements that actually keep the borders open.

And if we want value added we need to seriously reform the labour laws, the tax code, and scores of regulations all of which right now make it cheaper to add the value outside of Canada. Which is something that goes beyond just agriculture. Mining, forestry, and all of the other natural resource sectors have the same problems we do when it comes to adding value.

[ado089]

Ianben,
You asked if I would enter a 5 year supply agreement with someone? You bet I would, but they would have to be willing to pay for the "supply security" and there would have to be very good terms as far as taking production and clauses to take into account unitentional production shortfalls. Fair contract, fair price.

[Hopperbin]

Great focus group Ian.

[ianben]

ado
I am a little disappointed in you. Do you really think that is a fair deal that will attract local investment.

Lets pretend I have this great idea for a new heathly breakfast bar.

I come to your area invest loads of money, the bar takes off but in year 4 just when I am about to make a profit you want the option not to supply me because your grain does not meet my specs.

I dont need to understand why, because it was too, wet too dry, the deer ate it, I just need to know the grain will be delivered ,whenever, to my specification. Thats what I am paying a premium for.

I am a farmer, so yes, I see your worry meeting spec every year for every tonne is immposible.

The Coors contract above has addressed this problem by spreading the suppliers 100miles north and south of it maltings and storing over twelve months supply of barley. The earliest they change crop year is 1st Nov and I am sure it will be well into 2010 before they run out of 08.

Just imagine to cost of buying and storing 350,000 tonnes,figure might not be quite right but it was large.

If you were willing to give that everyday commitment what would it be worth?

Would a little more thought outside the bin find a solution.

Could we with the better price store some full spec as a buffer then if my internet site existed find full spec wheat to fill the contract and a good buyer for our not quite so good stuff.

You see without that contract I dont think my breakfast bar will ever go into production

[Hopperbin]

But Ian your saying the Health bar company should want to dump all risk back onto the producer who already is fed up with risk. Ado just wanted less risk. The health bar company likely can pay more but does not have to or wants the top 20 percent of grade that cannot rely on a producer to supply. As producers we have witnessed .85 cents per pound N so we must be cautious of long term contracts. 3 years from now it could cost double to produce them oats so a long term contract is something to stay away from since we cannot lock in inputs that far out. Could be a hell of a lot more to lose than gain by a long term contract.

[ianben]

Glad your enjoying this hopper

No Risk is shared after all it has taken three years before I saw any profit.
I am just trying to show the other guys view.

Like the long lease for a farmer.

The commitment to supply is what makes this happen not the price of the grain.

The grain in Coors contract is priced every year because of their reasons above.

Would it be that difficult to find a solution to supply given the above senario.

[chaffmeister]

The risk to the farmer isn't in the price of the commodity - it's in the margin, or return.

What about a 3 to 5 year contract between farmer and end-user that guarantees a return for the farmer - in other words, the price paid for the production is the cost of production plus a predetermined return (profit, or contribution margin).

What's your view:

How would you as a farmer react to that kind of offer? Guaranteed profit but no upside. Also, customer getting further into your business than perhaps you'd like.

How would the end-user react? Guaranteed supply (forget about production problems for now) but no price guarantee (cost of production goes up, so does his price).


Oh yeah - and it's VOLUNTARY.

[ado089]

Ian,
I am sharing the risk with the proposal I suggested. I'm saying that because you want to pay me a premium now, I won't jump ship and sell my product to the next guy to come along and start a health bar factory. In exchange for this I'm asking to be paid for my loyalty and asking for the production risk to be shared equaly, because guess what? If I don't get a crop for some reason out my control and can't deliver to your helathbar factory, I'm not making money either.

The problem with any of these IP and specialty crops is that they ask that we deliver first to them but they only pay enough of a premium to make us think that it's a good deal, then at the end of the day if we produce too much or deliver too little we get punished. That doesn't sound like sharing risk to me.