The CWB in an Open Market

[charliep]

What will the new world look like after August 1, 2012? What services will the CWB offer farmers? Are there gaps in the system that will need to be addressed over the next 15 months - market information, hedging tools, etc.

I know that the thread will go to politics but I am interested in your thoughts on the mechanics of an open market for wheat and barley (with the CWB as an alternative). If you understand your and the markets needs, then it will be a lot easier to provide input into the process and influence what will ultimately go into the new Act. A lot work has been done by outside groups but the farm community seems to have got stuck in the politics of single desk versus open market.

Some areas that are on my mind.

Market information and signals to the supply chain.

Hedging and all aspects of risk management (price and logistics).

Delivery access to elevators and storage policy.

Transportation coordination and logistics management.

Market development.

Making sales and execution on contracts.

Customer support.

Will get ragged on but my defense will always be to ask how things are done today and what will change August 1, 2012. Again interested in mechanics - not politics. If nothing else, get everyone thinking.

[charliep]

The mechanics of a change to a renewed CWB are contained in the task force report. I note one of the requirements of the report is the CWB was given the task of developing a business plan for how they would operate in an open market. That was 5 years ago.

[URL="http://www1.agric.gov.ab.ca/$Department/deptdocs.nsf/all/choice13151/$FILE/MC_Task_Force_final_Report.pdf"]task force report 2006[/URL]

[wd9]

An even bigger question, will this even be remotely started by Aug 1 2012? I get the feeling there will be a lot of resources, namely grain money that should have been paid to farmers, to keep this going in court for quite some time. The CWBeast will not go down quietly and to think otherwise would be quite naive.

[charliep]

The CWB has been experimenting with different programs and services. They can use this experience.

Examples.

Early payment option experience and processes can be used to manage initial payment adjustments down the road.

The CWB has moved to guaranteed delivery contracts on smaller wheat classes.

Experience around cash pricing on feed barley can be used to offer similar products for wheat. They came close to doing it for feed wheat this year with the 200 % EPO (know there are other percentages).

The CWB has offered 2 pooling periods for feed barley for several years.

The CWB has worked with grain companies on tendering processes for years now. Several CWB programs are sole sourced through individual grain companies (guaranteed delivery contracts).

The CWB effectively reduces risk and cost of carrying hedge accounts for grain companies today. If farmers were to continue to what to use the pooling system, why would grain companies fight this?

[charliep]

Add two more things on to my list.

Inventory financing and security needs.

Marketing skill developement and extension activities.

[charliep]

The first sign of insanity is talking to yourself. Ask forgiveness. From the June 2 western producer, page 14, I note the Allen Oberg's comments they are considering 10 business models for a renewed CWB - 3 or 4 of which deal with life after single desk.

Would be interesting to know what alternatives are being looked at.

[Fransisco]

I think customer or farmer support is going to be a big challenge. They're not going to be able to get away with being so bureaucratic any more.

I don't think they realize how frustrating it is when you call in or look at the website and you need a piece of paper and a calculator to figure out what you're actually getting.

When you call the local elevator you get your price and your delivery period and you're done in no time flat.

Having all sorts of complicated programs and pricing structures that are in no way user friendly may work when you've got a captive customer, but its going to be a whole different story when the customer can save themselves a big headache just by walking down the street.

[Burbert]

NEWS FLASH 2012 AUG 01 CWB Monopoly
Ends.
The price of grain falls to .01 per
bushel. Farmers scream and whine fer
board back to protect them. It was
their marketing board after all! Butt
they were to stupid to support it,
letting it slip away and making multi-
national grain companies the sole users
and controllers of the grain trade. A
great day for democracy and capitalism.
Now we're just like Amerikiee. Word of
advice boys/girls, arm yourselves to the
teethy, the bogey man is about to getya!
Sounds great doesn't it, Charlie?

[checking]

Is that all grain, or just wheat you speak about? Somehow, I doubt that will happen to just wheat.

[ProFarmer]

Just get rid of the CWB they have all been trained,to work at Wallmart, where THE LOWEST PRICE IS THE LAW...

[$short]

Good topic Charlie. We need to know how the new system will work.

-Price discovery for Durum will be a big challenge. Im not sure if a futures contract will work if the volumes are low.
-Financing grain purchases for the Graincos will be a new cost for them.
-Rail logistics and pre-booking of freight will be different
-What role does the CGC play in the non-cwb world. If grainco is buying on certain specs for their customer why will we need the CGC to say what it should be.

[$short]

Charlie

Is there any Export Financing Guarantees available from the Federal Govt. Do other industries have access to financing programs. For examaple the mining sector or manufacturing sector.

How do these industries finance global sales. Maybe the banks have export programs.

Sorry, my question mark button is broke on my laptop. haha

[charliep]

Agree that sharing of risk and financing of inventory should be a big benefit to a renewed CWB and why a grain company would want to continue to use CWB services in an open market. Also retaining customer relationships and being able to package business (perhaps via long term agreements) will be a benefit to a grain company.

Would also agree farmer support is a big unknown. Is farmer support for the CWB the equivalent to a mile wide and a mile deep or a mile wide and an inch deep. The CWB will have to be really creative in how they add value and show benefit to farmers. When you get beyond the rhetoric of single desk, that creativity is really lacking now.

[charliep]

They use things like the Export Development Canada. Crop industry including the CWB also use these products for specific customers.

[Burbert]

Farmer support means NOTHING. The mighty
majority REFORMERS will do what they want.
WARNING "Current government does contain
nuts".