• You will need to login or register before you can post a message. If you already have an Agriville account login by clicking the login icon on the top right corner of the page. If you are a new user you will need to Register.

Announcement

Collapse
No announcement yet.

Marketing Grain Without the CWB

Collapse
X
Collapse
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Marketing Grain Without the CWB

    Here are another couple of articles that
    we've put out the last couple weeks, on
    the future post-monopoly.

    *****

    An Open Market System

    It’s easy for producers who are excited
    about marketing their wheat, durum and
    barley in new and different ways next
    year to be highly critical of those who
    continue to fight the government’s move
    towards an open market system. The
    Canadian Wheat Board (CWB)’s leadership
    and its supporters are getting dragged
    through the mud these days for gross
    abuses of power, including doctoring
    voters’ lists and lying to the public.

    Unfortunately, such comments are no more
    productive than the CWB’s demands that
    the government honour the results of
    their internal survey.

    We need to move immediately past this
    high-browed blather and start thinking
    and talking about what an open market
    for wheat, durum and barley will look
    like. Some find this difficult simply
    because they don’t trust or understand
    how markets function.

    The question of how to transition a farm
    to an open market system can only be
    addressed once one has a basic
    understanding of the economics of
    commodity pricing. For most producers,
    just hearing the phrase, ‘economics of
    commodity pricing’ causes them to cringe
    with hateful memories of their least-
    favorite courses in university, or it
    puts them to sleep.

    This reaction is unwarranted.
    Recognizing and responding to market
    signals is actually much simpler than
    most of the technology, machinery,
    accounting, credit, chemical and
    fertilizer formulations producers are
    constantly working through. Furthermore,
    producers already respond to market
    signals for non-Board crops, which will
    come through in the same way for wheat,
    durum and barley in an open market
    system.

    The CWB has done a lot of interesting
    things over the years, but they have
    never helped producers make individual
    business decisions or manage the
    workload of marketing their crops. The
    organization has done branding and
    market development, which will continue
    in an open market system in a format
    similar to the Canola Council or Pulse
    Canada. Price pooling, the other aspect
    of the CWB’s operations that many
    producers value, will be available as
    well, just like it is in Australia.

    All that’s required for most farmers to
    move successfully through the transition
    to an open market system is a small
    amount of study in the economics of
    commodity pricing, just to reinforce
    their understanding of how supply and
    demand determine prices. Producers are
    going to be surprised by how quick and
    painless this transition is, especially
    compared to carrying around a fear of
    the unknown.

    www.farmlinksolutions.ca

    #2
    Clarity in Price Signals, Post-CWB

    While most of the attention in the CWB
    debate has, understandably, revolved
    around what type of marketing system
    Prairie producers want for their wheat,
    durum and barley overall, some of the
    more subtle impacts of the removal of
    the CWB monopoly can get overlooked.

    For example, an open marketing system
    means that the prices for farmers for
    CWB crops will behave similarly to
    canola, oats or lentils and others. Because values will respond immediate to
    market events, producers can make better
    selling decisions in response to the
    information available on an ongoing
    basis.

    Whether a person supports the single
    desk or not, one thing that a CWB
    monopoly and pooling system does is
    cloud market signals to growers. Pool
    Return Outlooks (PROs) are only updated
    monthly, and reflect a forecasted
    average value for the year. In the
    Producer Pricing Options (PPO) for
    wheat, the CWB Basis is only loosely
    tied to international cash values on any
    given day. There is also a CWB
    Adjustment Factor that pulls the daily
    Fixed Price Contract (FPC) closer to the
    PRO, regardless of whether events in the
    marketplace justify sharply higher or
    lower prices.

    Non-CWB crops typically pay different
    prices for delivery during different
    delivery windows. These prices change in
    response to supply and demand, and tell
    farmers when it is an optimal time to
    deliver their crops, paying them more to
    deliver when the market most wants it.
    Because CWB crops have their delivery
    regulated, producers are not given the
    opportunity to capture these additional
    returns.

    It’s understandable why the CWB PPO
    pricing programs are structured
    different than any other crop markets,
    since pool value needs to be protected.
    But the fact that these programs differ
    so starkly, and don’t respond to wider
    market signals in the same way, creates
    confusion for growers and makes it
    difficult to make decisions that help
    maximize farm returns.

    Price forecasting is extremely difficult
    for any market, and no farm sales plan
    should be based on the assumption that
    market highs can be hit with consistency
    or predictability. But at the same time,
    markets do provide valuable signals for
    growers on an ongoing basis. Some are
    obvious, such as sharp moves in outright
    prices, and others are more subtle, such
    as shifts in basis levels in response to
    windows of demand or changes in the
    amount of carry that may or may not be
    paid for delivering during certain times
    of the year.

    In a post-CWB monopoly world producers
    will more easily be able to read and
    respond to these price signals for
    wheat, durum and malt barley as they do
    for all the other crops they grow on
    their farm. While this in itself doesn’t
    ensure marketing success, it does create
    opportunities for growers to better
    manage their sales in a way that the
    market is telling them to, rather than
    trying to navigate through programs that
    on any given day only loosely reflect
    actual market events.

    www.farmlinksolutions.ca

    Comment


      #3
      A whole bunch of words that mean...you will take what you are offered and there will be no residual or interim payment and the money you receive IS the FINAL payment. If the market price goes up...tough titty, you had your chance...you could have waited for things to go up. Now go cry in the corner...maybe things will be better next year.

      And if you don't like the way we do business, just book a flight and get out in the world and sell your wheat on your own. No problem, we welcome competition.

      Comment


        #4
        I keep reading these "price signal" phrases to the point where I could just about puke. Farmers are quite familiar with "price signals"...in most cases it means...open your wallet and give us some cash or cheques as we are going to rip you off again.

        "Price signals" mean that the buyer is quite comfortable with the price he/she is offering and you should be as well. The buyer has the power...you have very little to none.

        Get used to it...we farmers will soon have "marketing FREEDOM"...YAHOO.

        Comment


          #5
          Good articles.

          I note the comment on price signals. What would call pool return outlooks? Producer payment options?

          Cash prices aren't perfect but they are a reflection of what someone is willing to pay at a point in time. The price reflects a sales opportunity including all the other factors such as grade, protein, other factors that provide the customer with what they need for a price they are willing to pay. These price signals are usually tied to delivery timing as well.

          I guess if you like the world where you are paid 40 to 60 percent at delivery and wait for anunknown final payment potentially a year out. Most other businesses would give their eye teeth to have this type of equity and profitability to manage a business in this way. But most farmers don't include cost of carry or storage in their calculations let alone outright cash flow requiremwents.

          Comment


            #6
            There was a time when I sounded like wilagro. But for me, I learned we can go thru life with a frown and our nose down in a rut, or we can take notice of the sunshine etc.
            I'm not trying to pump sunshine up your rear wilagro. just suggesting your health may need a thought change, or a new career.

            Comment


              #7
              blackpowder: I'm old and crabby and a REALIST and I call 'em the way I see 'em. People who see grain buyers as business "partners" really piss me off. They hold all the trump cards and if you don't want to play their game they know how to wield their power of the marketplace. It was quite a bit better when there was some competition but in today's world collusion seems to be the norm among those who are left.

              Comment


                #8
                I'm glad we can agree wilagro.
                I don't see anyone who has their own income as their ultimate concern a 'partner'!

                Comment


                  #9
                  I try to treat the people with the ability to ruin my day as human beings first. Courtesy, respect, appreciation.
                  Never ass kissing etc.
                  They are 9-5 working stiffs that don't own a bolt in the outfit.
                  They get shit on from both directions. Effective communication is necessary.
                  Policy can gouge you. But that is set by some bean counter at head office.
                  Yes, I get tired of being a 'nice' guy. But, as businessmen we need to deal with people on a daily basis.

                  Comment


                    #10
                    Wilagro,

                    So you continue to feel it is your right to control your neighbours private property...? and tell folks why you are right and smarter than those who respect others private property rights???

                    THis is a simple matter of principal. It never should have been the subject of a vote where the majority was given the right to trample on the rights of some who see private property rights differently than you!

                    When the Alberta Gov. tramples our property rights... you loudly proclaim the injustice!

                    Why?

                    Why is the CWB so different Wilagro???

                    Comment


                      #11
                      tommyboy, Sell your grain on the open
                      market, that ALREADY EXISTS, your pals at
                      the grain company will surely give you a
                      special deal, cousin your so forward
                      lookin and god feeern. Run wit the money
                      to the bank, where your banker friend will
                      help you out. The way you think its all
                      win, win, win, wind...........

                      Comment


                        #12
                        Many of the CWB haters are dreaming of the spot prices being offered in the US.

                        Charlie what impact do you think an open market will have on the US prices? It is well known that the CWB uses a measured and managed approach to US sales of durum and spring wheat, being carefull not to sell to much in the US and lower prices. They also try to keep them out of the US elevator system for obvious reasons and go to the end users direct.

                        But in an open market, is there not a risk of a less managed market that will especially lower durum prices? In a period of oversupply in which the multinationals can pick and choose origin, why would they always offer the top price in North America if suddenly they have access to the majority of exportable durum in the world from Canada?

                        Comment


                          #13
                          For a short term while the market becomes accustomed to a new situation - maybe some impact. Risk for this period is behavior like a kid with a new toy. Longer term (more than my opinion), I suspect the market will become accustomed to the new situation. As you have highlighted over time, the US is not a answer for everything nor will it be in the future. Competition in Canada and I will a bet a pretty disciplined prairie farmer will move durum into the US when warranted but not in a way that blows up the US market.

                          The CWB potentially has a role as an aggegator of supplies and a representative for the farmer in an open market. As highlighted by Brenda, there needs to be a discussion of the products and services the new will offer. If they have farmer confidence backed by contracted volumes, then there is a role for them in the future.

                          Comment


                            #14
                            Oh yes the diversion...without dealing with the problem.

                            Prices available to farmers today September 22 for milling durum:

                            France - CAD$13.01
                            USA - CAD$12.10
                            Australia - CAD$9.15
                            Western Canada FPC: - CAD$7.46

                            The CWB is asking $16.78 per bushel in the St. Lawrence.

                            You think that makes me a CWB hater...

                            What I despise is seeing our farmers getting in the ass year in and year out and people defending that incompetence...

                            Comment


                              #15
                              Burbert;

                              You said:

                              "Quitin time is gettin close. Not long
                              now and you kin take this job and shovel it.

                              Pensions round the corner, rrsps, indexing, Fu&* gag.

                              Gonna enjoy wathin
                              the young whizzbangs doin there tings.
                              And oh by the way, along the ways, I'm
                              gonna yap me trap and make it harder and hard fer Comedian gag businessss ta exist.

                              Sour g****s you bet, ya ain't
                              heard anything yet. Go angribusiness
                              go...... "

                              So you have become a 'pro-troll' contributor to Agri-ville.

                              Thanks for telling us why you are annoying!

                              Sad to hear you gave up. Hope you enjoy retirement more than farming. Hard to believe you will... being bitter often brings a bitter end!

                              All the best!

                              Cheers!!!

                              Comment

                              • Reply to this Thread
                              • Return to Topic List
                              Working...