At the core of the current debate about
the value of the Canadian Wheat Board
(CWB) monopoly is the question of
whether an individual producer can ever
expect to do better than ‘average’ in
pricing their crop. It speaks to the
economic theory that farmers are price
takers, and asks the question, does
market analysis work to achieve above-
average prices?
The CWB’s sales policy was founded on
the assumption that farmers are price
takers, which means that they can’t
control the price they are paid for
their crop. Their marketing activities
are designed to achieve an average price
because the assumption is that this is
the best possible outcome, short of just
being straight lucky.
While it’s true that an individual
farmer’s decision to sell or to hold
back his or her crop on any given day
won’t affect prices broadly, it’s a
complete misuse of that assumption to
say that farmers are helpless in the
marketplace.
Market analysis tools including
consultants, a broad range of
newsletters, web sites and other
information resources are widely
available to producers today. At the
time the CWB was put in place over half
a century ago producers had literally no
way to access price information outside
their local community. Technology and
access to information in real-time has
completely revolutionized the balance of
information power that farmers have
compared to the days of pre-World War
II.
Between then and now, many farmers have
been increasing their awareness of the
overall grain markets while others have
spent their marketing energies trying to
protect the CWB monopoly. Herein lies
the divisiveness: some farmers are
taking control of marketing using new
tools at their disposal because they
believe that market analysis works to
achieve better prices; others want the
CWB to maintain control because they
don’t believe that any other tools work
to get above-average prices for their
crops.
No self-respecting market analyst would
ever claim that they can perfectly
predict prices in the future,
particularly when looking out beyond the
next couple of months. Nobody has a
crystal ball; that’s the first thing you
learn in grain marketing. But there is
no question that market analysis works
to achieve above-average prices in
selling a crop. This includes not just
making informed decisions about the
direction of grain prices overall, but
also in how to extract extra value out
of the market from other actions such as
the timing of delivery windows,
forecasting local basis levels, and on
weighting sales towards crops that have
relatively less upside potential than
others.
Make no mistake, market analysis does
take a lot of work. For example,
FarmLink employs four full-time
experienced professional former traders
who do nothing else all day except to
research the markets, forecast prices
and make decisions about when to advise
our farm clients sell. While we still
have times when we recommend pricing
grain too early or too late, our overall
performance in terms of where we end up
in the range of available prices for the
year is pretty good as a result.
If a producer has the expectation that
they can’t make market analysis work to
achieve better prices, then a random or
average approach to making selling
decisions is going to work as good as
anything. You won’t sell much at the
highs, but you’ll also avoid selling too
much at the lows as well. However, never
before have producers had the ability to
take more control of their business and
achieve better results through the use
of tools that are widely available and
easily accessible to anyone.
www.farmlinksolutions.ca
the value of the Canadian Wheat Board
(CWB) monopoly is the question of
whether an individual producer can ever
expect to do better than ‘average’ in
pricing their crop. It speaks to the
economic theory that farmers are price
takers, and asks the question, does
market analysis work to achieve above-
average prices?
The CWB’s sales policy was founded on
the assumption that farmers are price
takers, which means that they can’t
control the price they are paid for
their crop. Their marketing activities
are designed to achieve an average price
because the assumption is that this is
the best possible outcome, short of just
being straight lucky.
While it’s true that an individual
farmer’s decision to sell or to hold
back his or her crop on any given day
won’t affect prices broadly, it’s a
complete misuse of that assumption to
say that farmers are helpless in the
marketplace.
Market analysis tools including
consultants, a broad range of
newsletters, web sites and other
information resources are widely
available to producers today. At the
time the CWB was put in place over half
a century ago producers had literally no
way to access price information outside
their local community. Technology and
access to information in real-time has
completely revolutionized the balance of
information power that farmers have
compared to the days of pre-World War
II.
Between then and now, many farmers have
been increasing their awareness of the
overall grain markets while others have
spent their marketing energies trying to
protect the CWB monopoly. Herein lies
the divisiveness: some farmers are
taking control of marketing using new
tools at their disposal because they
believe that market analysis works to
achieve better prices; others want the
CWB to maintain control because they
don’t believe that any other tools work
to get above-average prices for their
crops.
No self-respecting market analyst would
ever claim that they can perfectly
predict prices in the future,
particularly when looking out beyond the
next couple of months. Nobody has a
crystal ball; that’s the first thing you
learn in grain marketing. But there is
no question that market analysis works
to achieve above-average prices in
selling a crop. This includes not just
making informed decisions about the
direction of grain prices overall, but
also in how to extract extra value out
of the market from other actions such as
the timing of delivery windows,
forecasting local basis levels, and on
weighting sales towards crops that have
relatively less upside potential than
others.
Make no mistake, market analysis does
take a lot of work. For example,
FarmLink employs four full-time
experienced professional former traders
who do nothing else all day except to
research the markets, forecast prices
and make decisions about when to advise
our farm clients sell. While we still
have times when we recommend pricing
grain too early or too late, our overall
performance in terms of where we end up
in the range of available prices for the
year is pretty good as a result.
If a producer has the expectation that
they can’t make market analysis work to
achieve better prices, then a random or
average approach to making selling
decisions is going to work as good as
anything. You won’t sell much at the
highs, but you’ll also avoid selling too
much at the lows as well. However, never
before have producers had the ability to
take more control of their business and
achieve better results through the use
of tools that are widely available and
easily accessible to anyone.
www.farmlinksolutions.ca
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