Market Choice

[charliep]

Any thoughts on how the CWB would operate in a market choice environment for wheat and barley?

Operationally - Getting the right grain to the right place in time to satisfy a sales commitment/contract to a customer. How would the CWB share the wheat marketing channels/the distribution system with an open market?

Price pooling - A one year average price on the one hand that includes timing of sales, customer, location, grain (class, grade, protein), etc., etc. for money being deposited into the pool and then distributed out of the pooling system to farmers based on location (region of prairies) (as set by the CWB), freight adjustment factors (as set by the CWB), assumed average class/grade/protein spreads (as set by the CWB), etc. The open market would provide a daily cash price (not an average) with these factors getting built into basis. Both systems use futures markets on the operations side to set daily selling prices to customes/manage risk.

Thoughts?

[ianben]

Here Charlie I can cash price or pool with most large grain companies.
The length of the pool can also be choosen.

There is no company offering only pool so comparisons can be made with cash market performance.

Given the commercial competition in the pool market both on price and length of pool.

Will the CWB be able to survive without cash priceing and alternative pools?

[charliep]

Ianben has the right question. "Will the CWB be able to survive without cash priceing and alternative pools?"

Some scenario analysis/questions - You have been hired as the chief executive officer of the CWB starting Jan. 1/03. Aug. 1/03, some form of marketing choice for CWB grains is made available to all farmers in western Canada. Would you resign based on the thought the CWB couldn't survive a market choices environment? How would you modify the operations side of the CWB (both logistics of moving wheat/export malt barley to port and the operations of the pricing pools).

Other questions:

1) If you support marketing choice, what CWB actions/opportunities would you look for in this new world to justify delivering grain to the CWB system versus open market alternatives?


2) If you support the status quo/leaving the CWB, what would you have to see in CWB activities to justify continuing doing business with the them?

[TOM4CWB]

Charlie;

Can the CWB be a reliable low cost service supplier of matching customers with farmer producer growers of high quality products?

If the CWB continues spending millions on Political hogwash and communist propaganda, attacking the most productive and most innovative suppliers of the high quality products they need to supply, they do not have a hope.

THe CWB has totally wasted two years... unbelievable political capital, and destroyed loyalty with many farmers who once supported them.

Will the next CWB CEO and Board of Directors support Market Choice?

If they do not get with the program... the writing is on the wall.

[charliep]

What is market choice? My definition is a farmers right to sell any type of crop they want to anyone you want at any date and delivered to any location at a market price.

No cost export licenses (what ever the equivalent would be to domestic millers)are one alternative. Would market choice mean grain companies could source milling wheat/malt barley and make direct sales? What changes would occur on the regulatory side to make this happen? Could a market choice environment work with the current level of CWB control over the grain handling and transportation system?

[parsley]

Far reaching questions, charliep.

There are degrees of marketing choice. And the scope reaches beyond producers.

For example, in each province, producers have always had "marketing choice". Producers are free to sell. But there is no buyer! The CWB's legislative control over every meaningful buyer renders the farmers "marketing choice" benefit as worthless. The buyers are written in stone as being being designated as "Works for the General Advantage of Canada". And the CWB isn't afraid to jerk the buyers around by that nose ring.

Export marketing is different because the CWB has no control over those buyers outside of Canada. In this case, the CWB ensures a captive supply of Prairie grain by refusing export licenses to farmers.

While the CWB Act does not authorize the CWB a captive control over producer grain, they are legislatively authorized a captive control over the handling and marketing system.

Export marketing choice for producers only, will not satisfy some Agri-villers, but under the legislation currently available, it is there for the taking. Board policy makers or Goodale are not legally authorized by the legislation to stop export marketing choice for producers.

However, the kind of marketing choice many farmers want requires a change in CWB policy or a change in legislation. Unfortunately this makes us dependent upon either the CWB Directors and/or Parliament, which is presently represnted by the likes of Flaman or Goodale.

Can we have marketing choice with CWB maintaining control over handling and transportation? Considering the domestic feed grain situation, or the Ontario Wheat Marketing Board changes, or hog marketing, one could say yes.

Regulatory changes are needed though and that is key. Licenses must be granted for ALL grain not offered to, owned by, or contracted with the CWB.

And those licenses WILL be granted one way or another because the will in the West has grown very strong.

Parsley

[charliep]

Parsley

I have 1CWRS 14.5 % protein hard red spring wheat (could make it variety specific) - best quality milling wheat in the world. The system (including the CWB) somehow knows I have it. Can I sell this wheat to a feed mill/the non board?

[TOM4CWB]

Charlie;

THe CWB regulations make it illegal for anyone who is CGC licensed to buy it as anything but #1CWRS 14.5, if it is in fact this.

However you can alter it by taking one of the CGC grading factors... for instance mixing it with an unregistered HRS wheat variety... or even CWES wheat at low mix volumes... presto you have Canada Feed wheat.

And this feed wheat will still be the highest quality milling wheat on the planet.

THE low value the CWB places on feed wheat is a integrel part of the "monopoly" to hold milling wheat inside the "designated area".

THE buyback on feed wheat is excessive and not realistic in the least... but it has held the CWB monopoly together on milling wheat so far.

THe CWB has no business holding in unregistered varieties... as it does not market them... yet the CWB is in a big pressure point, cause they did Andy M. in for selling waxy barley that was an unregistered variety... and that they had no authority to stop.

If Fact Andy would have broken the law by doing the buyback... cause the CWB would and could only give an export license for feed barley... and Andy was selling human consumption...

ANDY would have broken the law either way... so ANDY chose the License, rather than paying for a CWB license that required false declarations.

The CWB tryed the same tactic on me... exporting milling grade wheat and issuing an export licence for wheat for feed use in the US. I made the CWB change the license... as I was doing a proper legal buyback.

[charliep]

Tom4cwb/Parsley

I hear your comment but that is not what I was asking about.

Parsley indicated that farmers have marketing choice today in who they sell to. Quote "For example, in each province, producers have always had "marketing choice". Producers are free to sell. But there is no buyer! The CWB's legislative control over every meaningful buyer renders the farmers "marketing choice" benefit as worthless."

I realize you can blend high quality wheat with other classes of wheat or keep quiet etc (done for years). It may also be a stupid financial decision (marketing choice means you have opportunity to sell for low prices if you choose). The question is can I deliver high quality wheat (high protein 1CWRS) to a domestic feed mill/feed lot within the current regulatory environment and not break the law. The answer may be that the feed mills/feed lots are not covered by CGC reguations.

[ianben]

Cant see what you are getting at Charlie
Why sell grade 1 as feed.
Are you saying mills not CGC registered would be outside regulation by CWB.

Could Tom supply ungraded variety specific wheat to a a value added partner outside the CWB.

Our maltsters and millers offer offer such contracts direct with farmers to obtain exact requirements.

Warburtons do the same in Canada so they must have found a way in spite of the system.

Is the problem with value added the Vaders of this world who see the customer as an enemy who is out to steal his crop.

We have them here too!!!

How do you get partners to invest millions in value adding plant without giving comitment to supply his needs?

Can you compete for exports with FSU with or without CWB?

New uses for wheat and other crops must be the answer

Shouldnt we be prepared to offer partners somekind of commitmenton supply and price.
Difficult for an individual though.

Why does CWB try so hard to export are they not in an ideal position to encourage investment in grain bussiness in Canada?

[parsley]

Charliep, from the following it appears the CWB has the power to not allow the feed mill to buy your No.1 milling wheat. As a producer, you are free to sell, but if they buy, presumably they are breaking the law.




From THE CANADIAN ENCYCLOPEDIC DIGEST:

"Both the Canada Grain Act and the CWB Act contain declarations under the Constitution Act, 1867, declaring elevators in Canada to be works for the general advantage of Canada and thus subject to federal jurisdiction.
.....The declaration in the CWB Act, ...... does include feed mills........"

"Parliament has authority to prohibit a local sale of grain without permit. The fact that the regulations under the Act, which have as their purpose the orderly marketing of grain for export, prevent the use of a mill declared to be a work for the general advantage of Canada from accepting grain for local trade or for engaging in the milling or grinding of grain, cannot be reason for holding them ultra vires, although they interfere with local dealings in grain within the province."

"...it is not to be doubted that Parliament can require the managers and operators of feed mills, declared to be works for the general advantage of Canada, to fulfil the regulations made by it in respect of their operation, and can impose appropriate penalties for failure or breach."

From CWB Regulations:

"Feed grain" means
(a) ".....wheat of the grade No.3 CWRS or wheat of any equivilent or lower level of excellence, and
(b) .......feed barley of the grade Extra No. 1 Canada Western or.....lower...."

Parsley

[TOM4CWB]

Charlie;

The answer is;

If the grain remains ungraded, and is not bought according to CGC grading standards, then yes... this would only apply if the mill was not a CGC Licensed facility.

If the Mill was a CGC licensed elevator?mill, then by law the mill is required by the Canada Grain Act to grade the wheat with an official grade... and a grade that is correct and represents the lot of grain delivered.

If the CWRS is above a 3CWRS minimum protien, then they cannot by law buy it non-board for the feed market.

[les]

Feedlots are not a CGC Licensed Facility right?

[charliep]

Ianben

Just testing the limits of our system/amount of regulation involved. All farmers would deliver this grain to the highest valued market - milling wheat is not likely to get sold as feed. I am trying to think outside the box and see what happens if the system here in Canada gets tested by different theories/directions.

Thanks for everones comments. It is helpiing me with a thinking process for a project.

[TOM4CWB]

Ianben;

The CWB has a problem in the domestic market, because of their marketing mandate.

CWB Act Section "5. The Corporation is incorporated with the object of marketing in an orderly manner, in interprovincial and export trade, grain grown in Canada."

Interesting that this CWB marketing object is not limited to just the grain grown in the "designated area" but grain grown in [all of] Canada!

Interprovincial trade was in the CWB mandate, but was removed by the Sommerville vs. Regina Supreme Court Ruling... the CWB only controls domestic wheat movement that ends up being shipped outside the province... and really has no control unless the wheat/barley products are human consumption and exported outside Canada.

NAFTA seems to have had an effect as well... with no fee allowed to be charged by the CWB on interprovincial licenses for wheat and barley movement.

There seems to be a directive from the CWB Directors/fed. gov. that prevents CWB direct selling into the "non-board" domestic market... although it cannot be found in the CWB Act or Regulations.

This is sad because the domestic CDN market most years is higher than the world market for these feed grains, causing "designated area" producers to receive often less than fair market value when selling to the CWB.