Allen Oberg, chairman of the CWB, stated
recently that a voluntary CWB would not likely
offer pooling because “farmers aren’t likely to be
interested”. He added: “...you’re never sure of
how much grain is going to be contracted to that
voluntary pool and that makes it difficult to make
sales.”
I think Mr. Oberg is wrong on both accounts. The
CWB’s producer survey showed 45% of wheat
producers favoured the “dual market” (a voluntary
CWB) and 41% preferred the single desk. The
CWB has stated many times that pooling is
fundamental to the value proposition of the CWB
as it is a fundamental risk management tool for
farmers. If that’s true, it stands that many
producers would expect to see the CWB offer
some form of risk management in the form of a
pool (or pools) once it loses its single desk and
becomes voluntary.
Also, Mr. Oberg is repeating the old CWB position
that a voluntary pool won’t work, based on the
assumption that it will have a fixed price or value
(like an Initial Payment or PRO). They say
farmers will opt out when the “open market” price
moves higher and, in a falling market, farmers
will want in or those farmers that are in the pool
will suddenly find that they had astounding yields
and want to deliver more than the CWB
anticipated. So in a rising market, the pool gets
starved and in a falling market, the pool gets
overwhelmed with high priced grain. The thing is,
none of this needs to happen.
A SUCCESSFUL VOLUNTARY POOL – RIGHT
IN OUR BACKYARD
Although Mr. Oberg suggests that there are many
reasons why there are not pools in other crops
like canola, oats, peas or lentils, he is mistaken
to believe that there are none. A very successful
pool is operated by Viterra out of Bow Island, AB.
This pool has been successfully managing risk
for, I’m told, about 100 edible bean producers in
the area since it was run by Alberta Wheat Pool.
I’m also told that even though there are times
when the open market price climbs above the
pool price, the pool is very successful at retaining
members. They see it as a long term prospect,
and over the years, they’ve done very well. They
also know that if they were to opt out, there are
five more waiting to take their spot. Once out, it
would take a long time to get back in – so guess
what? They don’t leave.
POOLS DON’T HAVE TO BE “ONE SIZE FITS
ALL”
Pools could be developed with different focuses:
· A specific class or variety of wheat
· Grain from a specific region or with specific
quality parameters
· Grain going to a singular buyer (a good
example would be something like the Warburtons
program).
· A few years ago, a colleague suggested a
separate pool for high quality wheat destined for
Japan.
· A select group – producer car loaders on a
short line share a common goal to reduce costs
and make their investment work. They could
easily market their grain together and pool all the
returns; a voluntary CWB could provide
marketing and pooling administration.
· Unpriced pools – there is nothing magic
about the CWB when it comes to timing of
pricings (selling futures). A pool could be offered
that gives its members a fixed basis as its only
price guarantee. Pricing would be at the option
of the producer, or he could choose the option of
having his portion of the pool professionally
managed (priced). Pools could compete on the
strengths of the pool managers’ track record,
much like a mutual fund.
When I acted as a consultant to Prairie Pasta
Producers (PPP), the CWB rejected the idea of
PPP, a co-op of about 600 farmers, processing
their own durum without going through the CWB
and its pool. To the CWB, it would mean PPP
members were “cherry picking” the high valued
domestic market. I suggested that every durum
farmer in Western Canada should be encouraged
to join and support the coop; that way, every
durum farmer would benefit from selling directly
to their own processing plant. Further, I
suggested that the CWB could also enable and
support it by offering a separate “pasta pool” for
those involved; this way every participating
durum farmer would get the same return from
their sale to their processing plant. All other
deliveries would go through the conventional
durum pool. Obviously the idea never went
anywhere.
There are also some developments in electronic
trading that enables the development of
averaging indexes that represent the average
pricing of a commodity over a selected period.
The index would be based on a specific cash
market; the electronic trading system would be
set up to generate the index based on trades
going through the system. Although used
extensively in energy markets, it could be applied
to agriculture quite easily. Grain companies (and
the new CWB) could offer pools on the basis of
these indexes, which could average the price
over any predetermined period –from weekly to
annually. So to get the average price over a pool
period is easier than ever.
WHEN IT COMES TO POOLING, WHY JUST
THE CWB
All this talk of different pools begs the question:
once the CWB no longer has the single desk,
government guarantees or enabling legislation,
what is it? CWB supporters have said, perhaps
rightly, “the CWB will not be anything more than
a broker or another grain company.” This is
especially true if the new CWB doesn’t offer
pooling, as Mr. Oberg is suggesting.
The federal government is committed to enabling
a voluntary CWB. If the CWB becomes just
another grain company, and anyone can pool,
perhaps the federal government should look at
new legislation that would provide the new CWB
– or any other entity – with the appropriate tools
to compete in the pooling and risk management
arena.
recently that a voluntary CWB would not likely
offer pooling because “farmers aren’t likely to be
interested”. He added: “...you’re never sure of
how much grain is going to be contracted to that
voluntary pool and that makes it difficult to make
sales.”
I think Mr. Oberg is wrong on both accounts. The
CWB’s producer survey showed 45% of wheat
producers favoured the “dual market” (a voluntary
CWB) and 41% preferred the single desk. The
CWB has stated many times that pooling is
fundamental to the value proposition of the CWB
as it is a fundamental risk management tool for
farmers. If that’s true, it stands that many
producers would expect to see the CWB offer
some form of risk management in the form of a
pool (or pools) once it loses its single desk and
becomes voluntary.
Also, Mr. Oberg is repeating the old CWB position
that a voluntary pool won’t work, based on the
assumption that it will have a fixed price or value
(like an Initial Payment or PRO). They say
farmers will opt out when the “open market” price
moves higher and, in a falling market, farmers
will want in or those farmers that are in the pool
will suddenly find that they had astounding yields
and want to deliver more than the CWB
anticipated. So in a rising market, the pool gets
starved and in a falling market, the pool gets
overwhelmed with high priced grain. The thing is,
none of this needs to happen.
A SUCCESSFUL VOLUNTARY POOL – RIGHT
IN OUR BACKYARD
Although Mr. Oberg suggests that there are many
reasons why there are not pools in other crops
like canola, oats, peas or lentils, he is mistaken
to believe that there are none. A very successful
pool is operated by Viterra out of Bow Island, AB.
This pool has been successfully managing risk
for, I’m told, about 100 edible bean producers in
the area since it was run by Alberta Wheat Pool.
I’m also told that even though there are times
when the open market price climbs above the
pool price, the pool is very successful at retaining
members. They see it as a long term prospect,
and over the years, they’ve done very well. They
also know that if they were to opt out, there are
five more waiting to take their spot. Once out, it
would take a long time to get back in – so guess
what? They don’t leave.
POOLS DON’T HAVE TO BE “ONE SIZE FITS
ALL”
Pools could be developed with different focuses:
· A specific class or variety of wheat
· Grain from a specific region or with specific
quality parameters
· Grain going to a singular buyer (a good
example would be something like the Warburtons
program).
· A few years ago, a colleague suggested a
separate pool for high quality wheat destined for
Japan.
· A select group – producer car loaders on a
short line share a common goal to reduce costs
and make their investment work. They could
easily market their grain together and pool all the
returns; a voluntary CWB could provide
marketing and pooling administration.
· Unpriced pools – there is nothing magic
about the CWB when it comes to timing of
pricings (selling futures). A pool could be offered
that gives its members a fixed basis as its only
price guarantee. Pricing would be at the option
of the producer, or he could choose the option of
having his portion of the pool professionally
managed (priced). Pools could compete on the
strengths of the pool managers’ track record,
much like a mutual fund.
When I acted as a consultant to Prairie Pasta
Producers (PPP), the CWB rejected the idea of
PPP, a co-op of about 600 farmers, processing
their own durum without going through the CWB
and its pool. To the CWB, it would mean PPP
members were “cherry picking” the high valued
domestic market. I suggested that every durum
farmer in Western Canada should be encouraged
to join and support the coop; that way, every
durum farmer would benefit from selling directly
to their own processing plant. Further, I
suggested that the CWB could also enable and
support it by offering a separate “pasta pool” for
those involved; this way every participating
durum farmer would get the same return from
their sale to their processing plant. All other
deliveries would go through the conventional
durum pool. Obviously the idea never went
anywhere.
There are also some developments in electronic
trading that enables the development of
averaging indexes that represent the average
pricing of a commodity over a selected period.
The index would be based on a specific cash
market; the electronic trading system would be
set up to generate the index based on trades
going through the system. Although used
extensively in energy markets, it could be applied
to agriculture quite easily. Grain companies (and
the new CWB) could offer pools on the basis of
these indexes, which could average the price
over any predetermined period –from weekly to
annually. So to get the average price over a pool
period is easier than ever.
WHEN IT COMES TO POOLING, WHY JUST
THE CWB
All this talk of different pools begs the question:
once the CWB no longer has the single desk,
government guarantees or enabling legislation,
what is it? CWB supporters have said, perhaps
rightly, “the CWB will not be anything more than
a broker or another grain company.” This is
especially true if the new CWB doesn’t offer
pooling, as Mr. Oberg is suggesting.
The federal government is committed to enabling
a voluntary CWB. If the CWB becomes just
another grain company, and anyone can pool,
perhaps the federal government should look at
new legislation that would provide the new CWB
– or any other entity – with the appropriate tools
to compete in the pooling and risk management
arena.
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