Prairie Farmers Want Voluntary Price
Pooling
As the camps on the two extremes step up
their efforts to either stop or rush the
government’s plan to end the Canadian
Wheat Board (CWB) monopoly, many farmers
are wondering what if any continuity
they might see in the 2012/13 crop year. Especially considering that winter wheat
is being planted in many areas now,
grain producers need some answers
quickly regarding future pricing
opportunities and market structure.
It would give many farmers some comfort
to know that pooling will still be
available as a risk management tool for
marketing their Board grains in the
future. The grain industry needs to
become vocal and creative in discussing
with farmers the contracting and
valuation parameters of a voluntary
pooled cash grain contract.
Based on our discussions with producers,
and FarmLink’s own risk management
protocols, we estimate that 20-40% of
the wheat, durum and malt barley crops
would be offered to a well-designed
voluntary pricing pool in any given
year. Market conditions and farm-
specific financial issues obviously come
first in determining how producers make
the decision to sell grain, but there
will be plenty of cases where a
voluntary pool would be an appropriate
and attractive method for managing crop
price risk.
If the Canadian Wheat Board (CWB) could
establish value related to end-use buyer
relationships and competitive logistics,
it would seem to be the best for all
parties that they offer the voluntary
grain pricing pool. But if the Board
continues to steadfastly refuse to
consider it, we’d like to see someone
else step up because voluntary pooling
could be a great risk management tool
for producers, and a new marketing
opportunity for the trade.
Minister Ritz has indicated that short-
term funding is available for work
related to transitioning to an open
market. The fact that new futures
contracts have been proposed for wheat,
durum and barley makes it especially
timely that the whole industry
collaborate now in creating viable new
marketing tools for the future.
In the past few years the CWB has taken
some solid steps forward in developing
new contracts, improving industry
relations, and understanding the price
risk related to pooling grain. Given the
staff’s passion and the organization’s
history, successful voluntary pooling
should be an easy next step.
It hasn’t been built yet, but all the
pieces are in place for a voluntary cash
grain pooling contract to work – farmer
loyalty, deep knowledge of managing
price signals and risk related to
pooling, strong relationships with end
users and established grain contracting
parameters. If the CWB and other buyers
of western Canadian wheat and barley
want to earn producers’ business for the
future, building a successful voluntary
pool is something that can be done right
now. It will move the debate forward in
a productive new direction, and reduce
the stress related to the uncertainty
about future marketing options for Board
grains.
www.farmlinksolutions.ca
Pooling
As the camps on the two extremes step up
their efforts to either stop or rush the
government’s plan to end the Canadian
Wheat Board (CWB) monopoly, many farmers
are wondering what if any continuity
they might see in the 2012/13 crop year. Especially considering that winter wheat
is being planted in many areas now,
grain producers need some answers
quickly regarding future pricing
opportunities and market structure.
It would give many farmers some comfort
to know that pooling will still be
available as a risk management tool for
marketing their Board grains in the
future. The grain industry needs to
become vocal and creative in discussing
with farmers the contracting and
valuation parameters of a voluntary
pooled cash grain contract.
Based on our discussions with producers,
and FarmLink’s own risk management
protocols, we estimate that 20-40% of
the wheat, durum and malt barley crops
would be offered to a well-designed
voluntary pricing pool in any given
year. Market conditions and farm-
specific financial issues obviously come
first in determining how producers make
the decision to sell grain, but there
will be plenty of cases where a
voluntary pool would be an appropriate
and attractive method for managing crop
price risk.
If the Canadian Wheat Board (CWB) could
establish value related to end-use buyer
relationships and competitive logistics,
it would seem to be the best for all
parties that they offer the voluntary
grain pricing pool. But if the Board
continues to steadfastly refuse to
consider it, we’d like to see someone
else step up because voluntary pooling
could be a great risk management tool
for producers, and a new marketing
opportunity for the trade.
Minister Ritz has indicated that short-
term funding is available for work
related to transitioning to an open
market. The fact that new futures
contracts have been proposed for wheat,
durum and barley makes it especially
timely that the whole industry
collaborate now in creating viable new
marketing tools for the future.
In the past few years the CWB has taken
some solid steps forward in developing
new contracts, improving industry
relations, and understanding the price
risk related to pooling grain. Given the
staff’s passion and the organization’s
history, successful voluntary pooling
should be an easy next step.
It hasn’t been built yet, but all the
pieces are in place for a voluntary cash
grain pooling contract to work – farmer
loyalty, deep knowledge of managing
price signals and risk related to
pooling, strong relationships with end
users and established grain contracting
parameters. If the CWB and other buyers
of western Canadian wheat and barley
want to earn producers’ business for the
future, building a successful voluntary
pool is something that can be done right
now. It will move the debate forward in
a productive new direction, and reduce
the stress related to the uncertainty
about future marketing options for Board
grains.
www.farmlinksolutions.ca