MCGA President Rob Pettinger Addresses the CWB Potentially Marketing Canola for Manitoba Growers

[shaney]

The Manitoba Canola Growers are exploring the opportunity for its members to market canola through the Canadian Wheat Board on a voluntary basis. Pick your jaw off the ground and check the calendar to see if this is an extended April fools joke. I'm sure that many of you had the same reaction as me.....HUH????

Based on a resolution passed in 2006 the MCGA is exploring the opportunity for its members to hand over their canola marketing to a pool account, similar to wheat. The Canadian Wheat Board has the ability to market other crops if desired but to this point crops have been coming out of the pool instead of into the pool.

On the [URL="http://www.mcgacanola.org/Exploringnewmarketingoptions.html"]MCGA website[/URL] they list four specific reasons for this initiative.
<ol>
<li>They like price pooling so that they don't have to guess on when to sell or hedge their canola</li>
<li>They would like to make greater use of producer cars and the Port of Churchill</li>
<li>They perceive that basis levels are often too wide</li>
<li>They want a window on industry cost and revenue components.</li>
</ol>
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Personally this makes no sense to me at all but I thought it would be very valuable to dig deeper and try and understand this significant shift in strategy. I contacted Rob Pettinger, President of the MCGA about the reasons for the volume survey for the CWB and how this would potentially work for Manitoba canola growers if initiated. Have a listen and you be the judge whether it makes sense to you if you think the Manitoba Canola Growers will make this happen.

If you cannot see the embedded video below <a href="http://www.youtube.com/watch?v=na2vddaj8wI&feature=channel_video_ title">Click Here</a>.

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[jamesb]

I think in the perfect world of tommorow when we get a voluntary CWB , I think it stands to reason that if the CWB can continue to exist in a dual market system they are going to need to be in other crops to be viable. From what I understand when the CWB is dealing with alot of state trading enterprizes overseas they get interest to purchace other commodities than what they do now. It would make pefect business sense for them to be moving other stuff as well. At the same time if a western Canadian processor is shipping, Pulse ,Canary , Oats,mustard etc overseas and has a profitable offer to sell and ship wheat to a regular paying customer they should be able to do so. The business can figure out what is profitable for themselves.

I feel sorry for the MCGA guys as they are following a motion passed by their membership to investigate this idea but they should have realized the s#%t storm they would create and the 10 second sound bite way the media aproaches this stuff.

[jdepape]

WHO WANTS THE CWB TO MARKET CANOLA?
From the CWB Monitor

The MCGA just launched a producer survey that takes an interesting yet biased approach to the question of the CWB marketing canola. The questions don’t allow you to just say “no thanks”. Here are the questions:

• Do you presently load producer cars?
• Would you load producer cars of canola if they were available?
• How many tonnes of canola do you produce annually?
• How many tonnes of canola would you be interested in having the CWB market on your behalf?

Unfortunately, this survey is badly flawed – and not because of the way the questions were asked (although there are problems there as well). The biggest problem is that anyone can respond (not just farmers) and you can respond as often as you like. For example, you could go through your local phone book and submit a response in each person’s name. Because of this alone the survey results will be totally worthless. (I’ve responded twice already; you just clear your computer cookies between each submission.)

But beyond that, the questions are really structured for those that like the idea of the CWB marketing canola in the first place. After reading the questions, those that don’t support the idea may simply assume that the questions aren’t for them and not submit anything. Take a look at the last question; it asks how many tonnes of canola you would like the CWB to market for you. You could say “zero” but I think many will just not respond. The risk is in the “results”; if the MCGA announces that the vast majority of those responding support the CWB’s involvement, it will be a serious misinterpretation and miscommunication.

Producer Cars

The questions are also about producer cars; specifically about loading canola producer cars. It almost appears that the MCGA is drawing a connection between CWB involvement in canola marketing and opportunities to load canola producer cars.

Let’s look at this a little closer. The reason why farmers load producer cars is financial. Loading a producer car you avoid about $13.00/tonne country elevation, or about $1,200 per car or more. This is possible only because you are going around a portion of the high cost CWB system. There isn’t the same gain on canola; according to data from the Federal Grain Monitor and Canadian Grain Commission, it appears that grain companies make their “handle” on terminal elevation and cleaning and make very little at the country elevator, no doubt due to stiff competition from local crushers. There just isn’t the high country elevation to avoid like you see in wheat; I don’t know what a guy needs to make loading a producer car attractive, but I’m sure you won’t get it from canola – with or without the CWB.

The value of canola marketing by the CWB

This opens the door to a discussion concerning the CWB’s value proposition to farmers and end-users.

• First off, the MCGA question is regarding the CWB marketing canola on a voluntary basis – not through a single desk. So the things that the CWB suggests are the strengths of the single desk – market premiums through market clout and “strategic marketing” – don’t even come into play here, regardless of your beliefs.
• The CWB talks about its “customer relationships” as a strength; it has none in the canola industry.
• CWB pooling is a form of risk management. Voluntary pools already occur in other crops; the heavy CWB structure is not needed to form a pool.
• The CWB offers pricing options. Pricing options on canola are already available through grain handlers and crushers and work very effectively. In fact, studies have shown that they are more effective and efficient than the pricing options available through the CWB. What’s more, they are simple to use and understand. It’s hard to imagine what the CWB will bring to the table here.
• The CWB acts as farmer advocate on various issues; marketing canola would add nothing to this activity, nor would this activity benefit the CWB’s marketing efforts in canola.
• The CWB says it “ensures farmers benefit from accessing the lowest-cost and highest-value port and terminal options”. The canola sector is highly competitive and data show that canola handling costs are much lower than CWB wheat handling costs. How will the CWB’s involvement shrink canola handling costs further?
• The CWB engages in market development and branding on wheat. In canola, the Canola Council of Canada has done a remarkable job at promoting canola and developing markets. Again, it is very difficult to see how the CWB’s involvement, even at a “voluntary” level, would add to the exercise.
• Let’s not forget that the CWB comes at a cost; data shows that the CWB cost to market wheat comes in at around $10.00 per tonne, above and beyond the higher system costs.

The Bottom Line

There is no benefit in having the CWB involved in canola marketing. What’s more, it would undoubtedly come at a cost to farmers. If you like the idea of pooling and want to try it in canola, remember you can do it without the CWB. If you like the idea of averaging out sales over the crop year, you can do that without the CWB too; simply sell an equal amount once a week or once a month throughout the crop year. The CWB’s Wheat Pricing Pace Model does essentially the same thing – there’s no reason why you can’t do it as well.

Come to think of it, if the canola industry can succeed so well (including farmers) without a single desk, and at a much lower system cost, with an industry-wide organization promoting and developing the market, and you can mimic much of what the CWB does, doesn’t this beg the question: why couldn’t the barley and wheat sectors do the same?

Regarding the seriously flawed MCGA survey, it is so seriously flawed, it is meaningless. The only good thing about it is, it has allowed a good discussion about what the wheat and barley markets could be like if they were allowed to function like canola.

[furrowtickler]

Well said .. nothing to add to that.

[TOM4CWB]

John,

Are Manitoba grain growers that different... insecure... and full of fear... that they waste a good chunk of cash on this crazy worthless survey?

How is this possible?

[wd9]

Seems crazy to shoot for mediocre pricing. If a producer sold 1/12 of their crop on the 5th day of each month, they effectively dollar cost average, or 'pool' their canola. Why pay someone to give you an averge price and in the end make even less? Can someone explain this to me?

[gustgd]

@WD9
It's because of the Intangible benefits

Media Release
April 6, 2011

Wheat Growers oppose canola marketing under existing Canadian Wheat Board

The Western Canadian Wheat Growers Association opposes the inclusion of canola marketing under the Canadian Wheat Board (CWB), until such time as the CWB is made voluntary and is divorced from government. The Wheat Growers are responding to an initiative by the Manitoba Canola Growers Association to gauge farmer support for voluntary canola marketing through the CWB.

“The threat of trade action is simply too great,” says Kevin Bender, President of the Wheat Growers. “Placing canola under the CWB, even on a voluntary basis, would jeopardize the phenomenal growth and success we’ve seen in the canola industry.”

The Wheat Growers note the CWB has been subject to more than a dozen trade actions over the past two decades. While the canola industry has faced various trade irritants, no trade action has ever been launched against Canadian canola on the basis of the manner in which it is marketed (i.e. the open market).

“We’ve seen tremendous private investment in canola processing and research under the open market,” says Rolf Penner, Manitoba Vice President of the Wheat Growers. “Marketing canola through a government board puts this investment at risk.”

The Wheat Growers maintain that placing canola under the CWB would invite trade action, given that the federal government currently guarantees all borrowings of the CWB. Even if the government did not guarantee the initial payment or borrowings related to the canola pool, the potential for cross-subsidization from wheat and barley pool accounts and/or the government-backed contingency fund would invariably lead to trade challenges, particularly from the United States. The value of canola seed, meal and oil exports to the U.S. currently exceeds $1 billion.

While opposed to the inclusion of canola under the CWB as presently constituted, the Wheat Growers support the voluntary marketing of canola by the CWB if the following conditions are met:

1) The marketing of wheat and barley through the CWB is voluntary.

2) All CWB financial ties to government, including the guarantee of borrowings and
the initial payment are eliminated.

3) The CWB is transformed into a private enterprise, whether that’s a co-
operative or some other business structure.

The Wheat Growers note there is nothing currently stopping canola growers from forming a voluntary pooling marketing organization, and encourage farmers who support this concept to concentrate their efforts in that direction. Three companies in Australia, including a producer co-operative, currently offer voluntary canola pools so the precedent is well-established.

For further comment, please contact:



Kevin Bender
President
(403) 350-4949


Rolf Penner
Manitoba Vice President
(204) 746-0129

[wakopa]

if cwb gets canola will they need to hire 500 more modified welfare goverment ------- maybe i will apply not do anything right but get paid very well

[jrlee21]

The survey is worstless because any one can vote in this survey as many times as you wont.

[Jay-mo]

Well, guess who's on the mcga board?? Wilfred "Butch" Harder. Do I need to say anymore?

[gustgd]

Sask Canola Supports Open Market
Written by Neil Billinger - 600 Action News-Local First
Friday, 08 April 2011

Sask Canola says it has nothing to do with a producer survey organized by the Manitoba Canola Growers Association. (MCGA)

The MCGA is asking prairie farmers if they would be interested in selling some of their canola on a voluntary basis through the Canadian Wheat Board. This is in response to an MCGA resolution passed in 2006 to examine ''alternative methods'' of marketing canola.

The survey has resulted in some Manitoba farmers requesting a refund of their producer levy (checkoff) on canola sales.

Sask Canola originally intended to issue a response following its board of directors meeting on April 20th, but Chair Brett Halstead says they have decided to speak now to avoid any confusion among Saskatchewan canola producers.

"We had a board meeting scheduled for April 20th and we've decided to move up our decision on talking about this because we have been getting some calls at the office from people not sure what our position is."

Halstead says Sask Canola has a very clear position.

"Sask Canola is not working with MCGA on this initiative. Sask Canola does support an open and voluntary marketing system for canola . . . It (current system) has achieved its goals since both supply and price have risen. We are not supporting the MCGA on this initiative, (but) we can't tell them what to do," says Halstead.

Halstead reassures Saskatchewan producers that none of their levy ''in no way shape or form'' is going to fund the MCGA survey, which is running in this week's Western Producer

[parsley]

Refreshing to find Western Canadaian men with large testicles and renewed spring fever and purpose. Parsley

[Klause]

I sent off a fiery message to the MCGA... And demanded my checkoff dollars back if this BS is what they use it for.


'Nuff said.

[gustgd]

Klause if your going to demand your checkoff back, leave in a tonne so that you can vote the buggers off next year.
As I understand it, if you withdraw all your money you are off the voter roles for two years.