From this weeks agriweek...
Complaints from prairie farmers about poor grades being received for weather-damaged grains are reaching a crescendo. Practically every farmer has a story about unreasonable grades, both at elevators and from the Canadian Grain Commission. Some have submitted samples of 2009 crops that graded No. 1 or 2 last year and are now 2 or 3. Most complaints involve milling wheat. A huge amount of otherwise sound wheat is being downgraded because discoloring
or wrinkling. The Canadian Wheat Board’s grade differential between No. 2 and No. 3 CWRS wheat is $16 a tonne.
Not surprisingly, many farmers are also taking samples to across-the-border U.S. elevators and getting quotations in some cases $30 to $80 a tonne more than the Wheat Board’s anticipated pool return for the Canadian grade.
The 2010 growing season in the west produced possibly a record-high percentage of low-grade wheat, which limits blending opportunities. Elevator companies know they will be stuck with the difference if a carload is downgraded at the terminal, so are being more cautious than in normal times.
The grading system, as much as the Wheat Board monopoly, is working to systematically reduce producer income
this year with no discernible benefit. U.S. wheat is graded, bought and paid for on its quality merits. Issues that do not affect milling quality or other utility are not considered and are not penalized. The market does not pay a premium for uniformity, predictability or consistency from one crop year to the next, especially with wheat prices above $7 a bushel.
The Canadian statutory grading system is an artificial, self-imposed handicap. It has arbitrary specifications and standards which determine grades, the worst of which is the sample’s physical appearance. Regardless of other attributes, grain is downgraded if it does not meet just one specification aspect. Wheat kernels that do not look as pretty as
they are supposed to can be perfectly acceptable for milling purposes. The U.S. system recognizes this. The Canadian system resolutely does not.
It is possible that the Canadian Wheat Board is buying wheat at low No. 3 or feed prices and selling it abroad on a
sample basis, capturing the premium. If it is not doing so it should be. A foreign miller does not care what the Canadian government’s name is for a sample, as long as it meets the need at hand. The Wheat Board should be ignoring the grading system and selling wheat at prices depending on its true, underlying characteristics and value to the buyer, just as American, Australian and all other exporters do. It would capture premium value on some wheat, though under
the collectivist pool system it would still be distributed among all growers.
But it is not in the nature of the Board to be creative or aggressive in these situations. A bureaucracy tends to act in bureaucratic ways. If the Canadian Grain Commission says a sample is feed wheat and the price of feed wheat is $40 a tonne less than No. 1 CWRS, it is bound to be sold generally as feed at $40 less.
In most years the statutory grading system does not matter as much as it does this season. Normally most wheat is high-grade and grade differentials are not very large. This year the Board-Commission system is costing prairie wheat growers millions.
One of these days somebody is going to have had enough of this. A way will be found to get grain legally out of the
Wheat Board Stasi police state and to a place where it will bring what it is actually worth, as determined by a free, competitive and open market, not by overpaid, undermotivated quasi civil-servant hirelings.
Somebody is going to figure out how to mix wheat and flax or wheat and canola in the proportions that will qualify
as mixed grain under the statutory grading system and out of the Board’s clutches. Someone is going to figure out how to rent one of the hundreds of disused industrial buildings on the proper side of the border and how to install a simple grain cleaner. Somebody will take Super-Bs full of flawheat or canwheat across the border two at a time, separate the contents, sell them to a nearby elevator for real money and come home to do it again. Or someone will figure out that the trip from eastern Saskatchewan to the Manitoba border to Rainy River to the closest eastern Minnesota elevator isn’t really that far, especially if there is a backhaul. Just let the Board try to interfere with interprovincial movement of domestic feed wheat, or try to extend its empire into Ontario. Someone might even figure out that the chances are low that a Conservative government which says it will eliminate the Wheat Board monopoly would put farmers in jail for crossing the border at any convenient customs point in broad daylight.
Complaints from prairie farmers about poor grades being received for weather-damaged grains are reaching a crescendo. Practically every farmer has a story about unreasonable grades, both at elevators and from the Canadian Grain Commission. Some have submitted samples of 2009 crops that graded No. 1 or 2 last year and are now 2 or 3. Most complaints involve milling wheat. A huge amount of otherwise sound wheat is being downgraded because discoloring
or wrinkling. The Canadian Wheat Board’s grade differential between No. 2 and No. 3 CWRS wheat is $16 a tonne.
Not surprisingly, many farmers are also taking samples to across-the-border U.S. elevators and getting quotations in some cases $30 to $80 a tonne more than the Wheat Board’s anticipated pool return for the Canadian grade.
The 2010 growing season in the west produced possibly a record-high percentage of low-grade wheat, which limits blending opportunities. Elevator companies know they will be stuck with the difference if a carload is downgraded at the terminal, so are being more cautious than in normal times.
The grading system, as much as the Wheat Board monopoly, is working to systematically reduce producer income
this year with no discernible benefit. U.S. wheat is graded, bought and paid for on its quality merits. Issues that do not affect milling quality or other utility are not considered and are not penalized. The market does not pay a premium for uniformity, predictability or consistency from one crop year to the next, especially with wheat prices above $7 a bushel.
The Canadian statutory grading system is an artificial, self-imposed handicap. It has arbitrary specifications and standards which determine grades, the worst of which is the sample’s physical appearance. Regardless of other attributes, grain is downgraded if it does not meet just one specification aspect. Wheat kernels that do not look as pretty as
they are supposed to can be perfectly acceptable for milling purposes. The U.S. system recognizes this. The Canadian system resolutely does not.
It is possible that the Canadian Wheat Board is buying wheat at low No. 3 or feed prices and selling it abroad on a
sample basis, capturing the premium. If it is not doing so it should be. A foreign miller does not care what the Canadian government’s name is for a sample, as long as it meets the need at hand. The Wheat Board should be ignoring the grading system and selling wheat at prices depending on its true, underlying characteristics and value to the buyer, just as American, Australian and all other exporters do. It would capture premium value on some wheat, though under
the collectivist pool system it would still be distributed among all growers.
But it is not in the nature of the Board to be creative or aggressive in these situations. A bureaucracy tends to act in bureaucratic ways. If the Canadian Grain Commission says a sample is feed wheat and the price of feed wheat is $40 a tonne less than No. 1 CWRS, it is bound to be sold generally as feed at $40 less.
In most years the statutory grading system does not matter as much as it does this season. Normally most wheat is high-grade and grade differentials are not very large. This year the Board-Commission system is costing prairie wheat growers millions.
One of these days somebody is going to have had enough of this. A way will be found to get grain legally out of the
Wheat Board Stasi police state and to a place where it will bring what it is actually worth, as determined by a free, competitive and open market, not by overpaid, undermotivated quasi civil-servant hirelings.
Somebody is going to figure out how to mix wheat and flax or wheat and canola in the proportions that will qualify
as mixed grain under the statutory grading system and out of the Board’s clutches. Someone is going to figure out how to rent one of the hundreds of disused industrial buildings on the proper side of the border and how to install a simple grain cleaner. Somebody will take Super-Bs full of flawheat or canwheat across the border two at a time, separate the contents, sell them to a nearby elevator for real money and come home to do it again. Or someone will figure out that the trip from eastern Saskatchewan to the Manitoba border to Rainy River to the closest eastern Minnesota elevator isn’t really that far, especially if there is a backhaul. Just let the Board try to interfere with interprovincial movement of domestic feed wheat, or try to extend its empire into Ontario. Someone might even figure out that the chances are low that a Conservative government which says it will eliminate the Wheat Board monopoly would put farmers in jail for crossing the border at any convenient customs point in broad daylight.
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