All farmers are equal – but some are more equal than others

[Braveheart]

chuckie, Darryl has passed but that doesn't mean the report wasn't cheesy. Everyone knows the report only looked at prices the CWB got, not what the farmgate prices to farmers were. Although the Schmitzes hold great barn dances in that old barn at Moose Jaw, their report sucked in the same way.

As has been pointed out many times, the cost of operating the board more than negates any real or perceived benefit from the single buying desk. Besides, no one has the right to tell me what I can or can't do with my own product.

[charliep]

The wheat is not a monopoly either in the world or Canada. Western Canadian wheat represents about 12 percent of world wheat trade. It does not sell eastern Canadian wheat.

It is a monopsony in western Canada in the export and domestic human consumption markets.

None of the studies you reference talk about the ability of the CWB to exert monopoly power. The arguments in the studies are around the ability of the CWB to manage western Canadian farmers access to the market and price differentiate among customers. Lots of disagreement with this concept. Not really all that well tested in the real world except among academics. Studies such as the Informa Economics one (2008) have shown the single desk have under performed world markets.

Also, the studies are about the single desk and not able individual farmers which would include cash flow and the forced carryover of inventory between crop years.

On the durum front, you are right western Canada does have significant (not total) market share in terms of trade. Even the CWB does not control weather however and ultimately, it is available supplies that control price. I would venture single desk provides no value to durum in sprite of Canada' dominance in this market but there will be arguements.

On the farmer side of durum, however, the answer might be different again. I note the difference between US spot prices and CWB pooled prices. Even a bigger issue is the cost of managing fixed price contract risk which remains at $2/bu. You have been asked to explain why this is acceptable. In the new world, it will not be. The CWB operations/risk management sides will have to be a lot more creative than they are today. Thats what competition does - gets rid of poor products and encourages innovation.

[FarmRanger]

<i>"Can monopolies extract higher rents (premiums) than multiple sellers?"</i>
Yes, but it's been pointed out many times before that the only place the CWB has a monopoly is within Canada, and even that is not a true monopoly, as wheat can be freely imported. Buyers can still access wheat, but at a higher price due to the extra freight. And we wonder why there hasn't been any new durum plants built here, dooming us to export where we have no monopoly.

<b>IF</b> (big if) Canadian wheat has some kind of brand appeal, why do we need the state trading agency to capture an export price premium?

[charliep]

Charlie since you are a trained economist one question. Can monopolies extract higher rents (premiums) than multiple sellers? YES IF THEY CAN CONTROL SUPPLIES. THE CWB DOES CONTROL SUPPLIES - MOTHER NATURE. THE CWB SELLS (FROM THE ACT) WHAT IS MADE AVAILALBLE TO IT.

And before anybody says the CWB doesn't have a monopoly. Remember it has a monopoly on Canadian wheat. If you want Canadian wheat you currently have once choice. With Durum that amounts up to 70% of the exportable world supplies in some years. ANSWERS ABOVE. NOT A MONOPOY.

Further, unless you have access to all the sales data and the competitors bids in all our markets over any long period you can't tell how the CWB is doing. HATE THE BLACK BOX AND NEED TO KNOW THEORY. WHAT IS RELAVENT IS THE THEORY OF PRICE DIFFERENTIATION WHICH INCLUDES PREMIUM MARKETS AND DISCOUNTED ONES TO MOVE VOLUME. ALSO DOES NOT INCLUDE IMPACT OF SINGLE DESK/A REGULATED SYSTEM ON SUPPLY CHAIN EFFIENCIES. SINGLE DESK AS OPERATED IN CANADA HAS A COST.

Comparing only to US prices which is one market out of many is not a sufficient analysis of performance. WHY SHOULDN'T A CANADIAN FARMER COMPARE WHAT THEY GET TO THEIR SOUTHERN NEIGHBORS. BOTH ARE MAJOR EXPORTERS.

[charliep]

My analysis is irrelevant by the way. The train has let the station and changes are occurring. The discussion is now about the new market place and the CWB's role in it.

[charliep]

CWB DOES NOT CONTROL SUPPLIES - MOTHER NATURE DOES THIS.

[jdepape]

chuckChuck:

1...KFT has been proven to be flawed. For example, it postulates that the non-CWB market (canola) has higher “risk management” costs than the CWB, based on poor assumptions. (No one else in the grain trade or academia agrees.) It also assumed the total street price basis was the actual cost of handling canola; it didn't reflect the selling basis adequately. (They even acknowledge that.)

2...The Schmitz and Gray studies are flawed too. They say the CWB price discriminates; it has been proven that using their methodology on canola would give the same results. Also, their studies suggest that the malt premium over feed is more than the typical spread between the two, meaning that without the CWB, the malt price would be BELOW the feed price. Ridiculous. Also, we are now learning that the CWB often restricted sales of malt barley, likely in an attempt to keep the premium over feed. Schmitz never took lost opportunities into account.

3...Can monopolies extract rents (premiums)? Yes. But the CWB is not a monopoly (single seller). It’s not even a monopsony (single buyer). It is a marketing agency that has the ability to keep hidden all its mistakes and mis-steps, can spend farmers’ money to fight against their wishes, and has no accountability to farmers. For example, the CWB reported 07-08 sales revenues of $8.4 BILLION but payments to farmers (pool and PPO) was $7.1 BILLION – a full $1.3 BILLION less. Where did the rest of it go? Some sales were made on a cif basis (meaning the CWB paid the ocean freight), but that does not come close to explaining $1.3 BILLION. Also, the CWB reported a loss of $236 million in speculative trading that year but there’s still a BILLION to explain.

4...A monopoly on Canadian grain? I disagree with your conclusion but you’re right, the CWB should have market power on durum. So please explain why the CWB only sold 52% of the crop in 2008-09 at a final pool price of $366.72 per tonne. The rest of it was sold in the 09-10 pool at a price of $201.13 per tonne. Nice.

5...Comparing only to US prices which is one market out of many is not a sufficient analysis of performance? The US is a reflection of the global market. It’s an open market where the domestic and export values arbitrage. In essence, it reflects all markets it sells into, most are the same the CWB sells into.

[Tom4Wildrose]

ChuckChuck,

Just because you repeat something over and over... does not mean it is true.

The fruit of CWB performance... the cost CWB protocol extracts from my farm to do a buy-back...

is far too often the opposite of supply-management... which just sells quota and expects growers to fill that delivery opportunity at a profitable price.

Show me one example when the CWB price offered 'designated area' grain growers... actually included a cost of production component to the price paid these grain growers.

The CWB keeps telling us grain growers we are getting less... because competition forces the price down.

CWB sales are Opposite to the 200 percent tarrif that stops internal CDN supply management prices paid our producers... from being pushed lower from competition with produce grown outside Canada.

As a CTEAM graduate... we were given all sides of the supply management system. As we were with the CWB.

In Quebec they were very sure... and gave us convincing numbers that showed both consumers and producers benefit from our system with constant safe supply as well as good returns for supply management sector farmers.

A balance good for all. Milk is a 'fair price' at my Wildrose Coop store in Killam. As are eggs, chicken and turkey.

You have no argument I can see that is rational or logical.

Truly there are clearly costs to supply management. Clearly Canadians are willing to pay those costs... to have a safe secure supply of good fresh produce.

Totally disconnected from the CWB 'single buyer' unaccountable secret 'commercially sensitive' rat a tat tat... line we are given... just before we are told by the CWB the price paid to us is dropping AGAIN.

[BTOfarmallll]

BTO, I'm no better than any Man, Just more Focused & got a Better Plan!!!!!!!!!!!!