The Monopoly Behind The Mineral

[parsley]

hey cole you have a little bit of fun in u! I like. pars

[furrowtickler]

chucky - Potash/eggs/milk production can be controlled thus monopoly tends to work. Grain production in western canada is a crap shoot for quality and quantity every year - this is the underlying issue that gets missed when people like you whine about double standerds.

[charliep]

chuckChuck

You talk about market information. Here is an opinion piece that deals with that.

[URL="http://www1.agric.gov.ab.ca/$Department/deptdocs.nsf/all/choice13307/$FILE/Strengthening-the-Canadian-Wheat-Board.pdf"]opinion[/URL]

[chuckChuck]

If you want more information on the durum market read the following which was published April 2010. It is now out out of date but explains the situation at the time.
http://www.cwb.ca/public/en/farmers/forecasts/durum/
As you can see there are a number of factors in the market that are influencing prices and movement. The long and short of it is world supply is greater than demand. When Durum prices went crazy in 2007-2009, what happened? Producers world wide responded and oversupplied a relatively small tradeable market. That is not the fault of the CWB. If you have too much product for the market what do you expect the CWB to do with it? Dump it in the ocean? Two words - supply and demand.

[bucket]

Actually there was was some grain dumping in the St. Lawrence not too long ago.

[JDGreen]

chuk i expect that if they don't know what to do with it, then they should realease it to me via FREE export licenses. Please tell me what is wrong about that?

[charliep]

chuckChuck

Just to correct your premise, the world didn't over produce durum
Canada. As the CWB has highlighted, Canada is about 50 %. Given
the two next biggest exporters (US and EU) are also big durum
importers (high quality Canadian) our actual market share after
netting these two regions out is bigger.

So I am going to give you a scenario. The CWB chooses to hold
durum off the market during periods of rising prices - have the
market power to do it. Prices go higher. When prices start to come
down, the CWB still holds supplies in hopes of maintaining price
levels. Western Canadian inventories are bigger than what they
might have been based on corporate decision as a single desk - not
an individual farm manager decision based on their business needs.

Farms react to the higher prices by increasing acres in response to
the high prices. Canadian supplies (inventory and production) get
bigger. Being the major play in the world market, bigger Canadian
supplies equals lower prices. The single desk seller continues to
hold supplies off the market to force (we could have a discussion
about the level of success of this program). Prices still drop below
spring wheat.

Three years later. Farmers finally get the signal to drop durum
acres. Old crop durum plugs the elevator system and they put on a
massive export program to unload supplies from the system.
Mother nature signs up on the acreage and quantity followed by the
double whammy of crappy quality. Durum prices rise. The next
round of over production continues. So here we sit fall of 2010.

Perhaps the real sin of Canadian durum is the inability to develop
new markets. But that is a different thread.

[highwayman]

Chucky you say overproduction was not the fault of the CWB. Jeeez louise give your head a shake. When they issued Pro's of 3 dollar premiums to wheat 2 months before seeding when the the world was already awash in durum what message did that send to producers at the time and then only to have the board lower it from $8/bus to $5/bus in the coarse of 6 months. The monthly pro's are completely useless and are not worth the paper there written on. The CWB distorts grain markets more then any other entity we know!

[charliep]

Don't think the CWB can held 100 % accountable for price. The
question is did they do a good job of packaging market
opportunities for farmers at the price of the day? If they made the
corporate/single decision to hold durum off the market, was it a
good one? Whose decision should it be to carry durum between
crop years - you as a farmer or the CWB as single desk buyer?

Note the question started with monopolies. A first step for a
monopoly seller is to control supply. The supply issue is not a CWB
one but rather farrmers decisions around acres and Mother Natures
decisions around yield and quality.