From Agriweek November 26 2007:
It is the expected thing for the Canadian Wheat Board’s propaganda department to huff and puff and to sneer at, belittle and marginalize anyone who has the temerity to suggest that the Board might not be the most competent, and in all ways the most perfect, entity on this planet. The most competent part of the Board is easily its propaganda ministry. So it was the other week when a prominent farm newspaper picked up on the curious fact, explored originally in this newsletter, that U.S. grain exporters are doing a nice business exporting durum wheat from a country that has not grown enough for its domestic needs in years.
The U.S. is the second-largest importer of Canadian Wheat Board durum so far this crop year. Its grain trade is importing much more than it needs and exporting the excess to offshore customers, either grain that originated physically in Canada or American-grown durum that was displaced by Canadian imports. Of course it amounts to exactly the same thing. In 2007 the U.S. harvested 72 million bushels of durum wheat and carried in 20 million from 2006-07. Domestic needs are 79 million. Imports of just 7 million bushels would satisfy domestic needs and maintain carryover. The U.S. agriculture department projects durum imports from Canada in 2007-08 at 36 million bushels and durum exports from the U.S. at 30 million, but clearly both will be higher. Up to Nov. 8 in the U.S. crop year that began June 1, American traders loaded out 362,000 tonnes of durum wheat, compared to 107,000 to the same date a year ago. and reported orders for 544,000 more, vs. 417,000 a year ago, a total of 33 million bushels in half a year. This is not a new thing. In 2006-07 the U.S. grew 53 million bushels of durum, used 79 million domestically and exported 35 million.
The grain trade of the world makes its living by buying low and selling high (or, these days, buying high and selling higher). The durum that is being exported out of the U.S. was bought or is being bought at lower prices than those at which it is being sold. It is being obtained in the continental United States from only two sources: American growers and the Wheat Board. If the Board is really selling in the U.S. at premium retail prices there should be no such margin for U.S. exporters. There is also the easily-verifiable fact that grain elevators in North Dakota routinely pay higher prices for durum than the Wheat Board does.
In a free and open market with no monopoly single-desk presence, U.S. exporters and flour mills would be in continuous competition with each other for durum deliveries from American growers, almost all of whom are in North Dakota and Montana. Growers sell to the highest bidder they know of. Domestic needs would take preference, so American flour millers would pay whatever it takes to keep the durum at home. Only when domestic sources are exhausted, or are near to being exhausted, should users turn to imports. Exporters to the United States. such as the Wheat Board, would be residual suppliers supplementing inadequate local production. The Wheat Board is not a residual supplier. Durum is coming into the U.S. from Canada and going out of the U.S. to offshore customers that the Wheat Board should be servicing directly.
The U.S. imports more oats than it grows and exports practically none. The oats market is open and transparent. American and Canadian growers are a single source and prices are completely equalized. No one would dream of trying to export oats out of the U.S.
To the Wheat Board’s principal propagandist Fitzhenry, this is all “an absurd assertion.” “There is no Canadian durum being re-exported.” These are “wild and unsubstantiated allegations that betray a misunderstanding of international durum marketing.” “We are in a position to obtain the best price of anybody in the world for durum and that’s exactly what we are doing.” End of story.
Well it’s not the end of the story, at least not to anyone who does not accept the divine right of the Canadian Wheat Board. The Board gives no explanation and advances no hypothesis because firstly it is not in the business of explaining itself to anyone and secondly there is no convenient or believable explanation. Everything points to the conclusion that the Canadian Wheat Board is being outsold, outsmarted and outmaneuvered by private grain traders in the hottest durum market in history. So are its captive Canadian grower-suppliers.
The Wheat Board is a cost-minus operator. It can sell any grain at any price, deduct any expenses it feels like incurring and pay what’s left over to the growers. Every other trader has to pay competitive prices to attract tradeable supplies, then compete with other sellers to gain customers. The durum story may not be the biggest deal in dollar terms but it looks for all the world like a very big symptom of a very dysfunctional system
It is the expected thing for the Canadian Wheat Board’s propaganda department to huff and puff and to sneer at, belittle and marginalize anyone who has the temerity to suggest that the Board might not be the most competent, and in all ways the most perfect, entity on this planet. The most competent part of the Board is easily its propaganda ministry. So it was the other week when a prominent farm newspaper picked up on the curious fact, explored originally in this newsletter, that U.S. grain exporters are doing a nice business exporting durum wheat from a country that has not grown enough for its domestic needs in years.
The U.S. is the second-largest importer of Canadian Wheat Board durum so far this crop year. Its grain trade is importing much more than it needs and exporting the excess to offshore customers, either grain that originated physically in Canada or American-grown durum that was displaced by Canadian imports. Of course it amounts to exactly the same thing. In 2007 the U.S. harvested 72 million bushels of durum wheat and carried in 20 million from 2006-07. Domestic needs are 79 million. Imports of just 7 million bushels would satisfy domestic needs and maintain carryover. The U.S. agriculture department projects durum imports from Canada in 2007-08 at 36 million bushels and durum exports from the U.S. at 30 million, but clearly both will be higher. Up to Nov. 8 in the U.S. crop year that began June 1, American traders loaded out 362,000 tonnes of durum wheat, compared to 107,000 to the same date a year ago. and reported orders for 544,000 more, vs. 417,000 a year ago, a total of 33 million bushels in half a year. This is not a new thing. In 2006-07 the U.S. grew 53 million bushels of durum, used 79 million domestically and exported 35 million.
The grain trade of the world makes its living by buying low and selling high (or, these days, buying high and selling higher). The durum that is being exported out of the U.S. was bought or is being bought at lower prices than those at which it is being sold. It is being obtained in the continental United States from only two sources: American growers and the Wheat Board. If the Board is really selling in the U.S. at premium retail prices there should be no such margin for U.S. exporters. There is also the easily-verifiable fact that grain elevators in North Dakota routinely pay higher prices for durum than the Wheat Board does.
In a free and open market with no monopoly single-desk presence, U.S. exporters and flour mills would be in continuous competition with each other for durum deliveries from American growers, almost all of whom are in North Dakota and Montana. Growers sell to the highest bidder they know of. Domestic needs would take preference, so American flour millers would pay whatever it takes to keep the durum at home. Only when domestic sources are exhausted, or are near to being exhausted, should users turn to imports. Exporters to the United States. such as the Wheat Board, would be residual suppliers supplementing inadequate local production. The Wheat Board is not a residual supplier. Durum is coming into the U.S. from Canada and going out of the U.S. to offshore customers that the Wheat Board should be servicing directly.
The U.S. imports more oats than it grows and exports practically none. The oats market is open and transparent. American and Canadian growers are a single source and prices are completely equalized. No one would dream of trying to export oats out of the U.S.
To the Wheat Board’s principal propagandist Fitzhenry, this is all “an absurd assertion.” “There is no Canadian durum being re-exported.” These are “wild and unsubstantiated allegations that betray a misunderstanding of international durum marketing.” “We are in a position to obtain the best price of anybody in the world for durum and that’s exactly what we are doing.” End of story.
Well it’s not the end of the story, at least not to anyone who does not accept the divine right of the Canadian Wheat Board. The Board gives no explanation and advances no hypothesis because firstly it is not in the business of explaining itself to anyone and secondly there is no convenient or believable explanation. Everything points to the conclusion that the Canadian Wheat Board is being outsold, outsmarted and outmaneuvered by private grain traders in the hottest durum market in history. So are its captive Canadian grower-suppliers.
The Wheat Board is a cost-minus operator. It can sell any grain at any price, deduct any expenses it feels like incurring and pay what’s left over to the growers. Every other trader has to pay competitive prices to attract tradeable supplies, then compete with other sellers to gain customers. The durum story may not be the biggest deal in dollar terms but it looks for all the world like a very big symptom of a very dysfunctional system
Comment