Today's Farmer

[TOM4CWB]

Steve,

I believe that today's farmer needs to look at what pays the bills, cash flow, and profit margin.

The reason a farm is in trouble today, is if cash flow, cannot pay all the bills.

Now if I pre price, and buy options back, I can cash flow everything including the cost of the options.

Now your statement about farmers selling too cheap, that is simply a matter of what the cost is for the farm, what cash flows are to be met, and wether an overall profit is being produced by doing a specific sale transaction.

The beauty of the pea market this year is that if a farmer needed $5.00/bu for his feed peas, the market offered it to him. The market also offered $4.00/bu, and if that was all he expected, and could live with that $4.00/bu was fair for him too.

The fellow that sold at $4.00/bu and the fellow who sold at $5.00 were both treated fairly, and neither can complain.

Was 4.00/bu too cheap?

I do not believe it was, but the fellow selling at $4.00/bu allowed the $5.00/bu price to come about.

Substitution is a sneeky animal that will kill a market, if that market is not willing to be fluid and supply the needed product when demand occurs.

If we do the supplying, then an investment and stability happens in our market.

If we outright refuse to supply, substitution will often not give a second chance, or if that chance occurs a cost far above the value of the first sustitution cost will be extracted from us as if to prove we are really serious about wanting this specific market back.

This is why the CWB "theory" about the single desk "extracting" a "premium" is so short sighted.

It is clear that the CWB, according to Adrian Measner and Greg Arison, MUST BE COMPETITIVE.

I believe that the human consumption $6.25/bu Pea and Oat$3.50/bu market are excellent examples of why a "choice" marketing system is the fairest when it especially comes to drought years.

Why should the farmer in Milk River not be able to sell his 5 bu/ac winter wheat crop to a US marketer at the fair market price value?

Instead the CWB system says the buy-back must extract back this drought "premium" and pay it to me, who harvested a good crop at 50bu/ac through the pooling accounts.

Is this fair?

[Steve]

Farmers should know the food chain. [Just coffee shop talk]

I am sure you all heard farmers say the middleman makes a big profit on a loaf of bread, because he sells it for a dollar and only pays the poor farmer less then ten cents for the wheat that goes into it.

Farmers let’s take a positive look at the middleman and his big profit and analyze the process the wheat goes through to become a loaf of bread.
We can start by purchasing land to build a flourmill and wheat storage bins. Next step is the construction of the buildings and the instillation of the equipment. Labor unions are involved that can disrupt and add to the cost of the building. The same problem farmers have when labor unions stop grain transportation and handling by demanding bigger wages and benefits.

Now lets look at the positive side of the employee and I know some have their priorities mixed up which are not any different than farmers, but also need the money to pay their bills. The farmer may feel that he is not making any money but can sell out in his senior years and use that money as a pension. This farm could be sold to family members. The employee does not have that option so he or she is continually trying to force the employer to pay higher wages and pensions.

Now back to the loaf of bread. The flourmill company have to secure a supply of good quality wheat at a premium to keep the mill working. This wheat has to be transported from the grain elevator to the flourmill and add elevation charges to that. [ Lets leave the CWB out of this one and give to a rest.]
Then the wheat has to be processed, milled, packaged, stored and the flour has to be marketed. There is also competition in this field so the mills have to maintain good quality, price and service to stay in business. They also have the same problem as the farmers with surplus and or poor quality.

Next on the chain is the bakery with more buildings, equipment, transportation, packaging and additives to the bread to satisfy the customer. People want fresh daily bread so the production has to be controlled. This operation needs more employees.

The final step is the store with more builds, equipment, employees and competition.
The escalating cost of equipment replacement, and employees wage increases are all the same in the chain of that loaf including the poor farmer’s.

I just wanted to point out that the 90 cents per loaf employs a lot of people who eat that bread and that is why the farmer can sell his grain. Some of the employees get laid off and others work for a minimum wages. I think this makes farming look a little better.

[TOM4CWB]

Steve,

I agree with you about the bread.

Besides if I really was offended I could just use my own mill and bread maker, and that 9 cents of wheat, and a little yeast and power, presto I can make a litte money in my own kitchen.

And almost any other Canadian can do the same.....

I can only change my own operation and make it more efficient, but unfortunately the CWB by law is forced upon me, therefore I must try to change it as well....

Steve, wouldn't you agree that I should be able to sell my own wheat,not useing any CWB services or elevator grain handling systems, without being forced to deal with the CWB system///

I can mill, mix and bake, and then eat a loaf of bread produced on my farm without CWB interference, why can't I sell my wheat witrhout their unwanted help?????

[Steve]

Tom4CWB

Yes we need changes in the CWB performance and they will come about in time, but because of Government bureaucracy it takes longer. The reason I am saying that change is on the way, because we see deregulations in other industries.

I think we should have patience with changes and this would give some people time to understand them a little better.

There are a lot more farmers to change, then to deregulate an industry with just a few large corporations. It is hard to make an old horse do new tricks but do we know if the new ones are much better.

By reading between the lines in most of your comments I would say your farming operation is successful even with the present CWB performance, but keep after them and changes will come.

Steve

[ianben]

Hi Steve
You are giving sound advice here.
I too try to follow a good rotation and market in an orderly way not holding out for the last dollar.
I do feel however there is perhaps a better way to market today which would help smooth out the highs and lows of both production and price and give EVERYONE in the food chain a better deal.
I also feel sorry for the guys we buy from how do they know how many combines tractors chemicals to produce when our demand is so irratic.
They fix prices are prepared to hold stocks and supply demand which they then replace.
This is how I would love to operate.
Toms futures options will never achieve this with or without the CWB. In fact I think they make the highs higher and the lows lower.
Why is a 19th century system the only way to market today?
I hate wingeing, takeing government handouts, producing more in an over supplied market.
Just show me a better way.
I dont believe old dogs could not learn new tricks especially ones that help everyones bottom line.

Regards Ian

[Steve]

Ton4CWB

My reply to your statement, if we outright refuse to supply, substitution will often not give us another chance.

I believe if you have a good product don’t be afraid to ask the right price for it. We can even use Safeway store as an example they don’t change their price for every customer that comes into the store because they have good products to sell. They know good customers will be back for quality and service that Safeway provides. We can apply this system to our domestic sales but need to modify it for export.

Tom! you really don’t sell any different because when you pre-price on the futures or buy options you are also setting a price and that means your not going to sell below production cost.

If you create a shortage or a surplus the market price will fluctuate at the same rate beyond your control, therefore you better be prepared to watch the market daily. That is why we should try and control production. Most farmers don’t want to add more stress by sitting at the marketing table every day.

I trusted people to market my grain. That gave me time to get frustrated on the golf course because my golf ball is as predictable as grain prices.

Your next statement; that I should be able to sell my wheat not using the CWB services or elevator handling systems, therefore you are also implying too use producer cars.

You better slow down on this one, because if every farmer used the same sales approach what would happen to your good partners that you always refer too.

[ianben]

Steve
I dont believe we can control production
only Mother Nature can do that for us.
This is who is in control today; your CWB, Toms futures, my subsidies, all trying to tame her and failing miserablly.
We could learn from Safeway though.
Fix a fair price.( middle of historic high /lows)
Put it on the shelf(list it on the internet)
Keep the shelves full(hold stock)
Monitor competitors prices and services and use these to fix price.(do not try to be the lowest priced producer every time.)
Keep customers happy(Stable prices do make for happy customers I am sure.)

We cant control production but we must be able to market better!!!

Regards Ian

[TOM4CWB]

Steve,

I was not talking about using ANY Canadian grain handling, marketing or grading services.

I simply need to load my truck and take it to the buyer, if that be a processing plant or a US buyer that has nothing to do with the Canadian system.

Because my grain will even be graded with a US grade and not be able to claim the Canadian quality advantage, I believe this would be fair, infact in the 1950's the CWB allowed this type of transaction without the buy-back!!

We used to have an old saying in my marketing courses and seminars, If we don't sell some grain, then the price can't go higher later in the marketing year. Substitution is the reason why this is true, particularily in today's world of oilseeds!

For the people that have been working on marketing choice, change at the CWB seems to be like watching a glacier melt!!!

Thankyou for your kind words Steve, the thing that hurts me the most is to see a number of farmers in their 40's that would be still farming, if the CWB changes could bring changes particularily on the Cash Flow side.

When the bank pulls the plug and gives 10 days to sell everything, the CWB system is difficult to deal with!

[Steve]

Hi Ian

Thanks for your good comments and hope you had a better than average year.

I retired coming on two years but deferred most of my canola sales to January of 2002, so I think Revenue Canada will class me as a farmer for one more year. My golfing came to a halt with the weather so I decided to join you farmers on the net. I hope my comments don’t offend anyone because I enjoy reading everybody’s views and like to add my two cents.

I hope this cold weather will get more people back on the net.

Regards Steve.

[Steve]

The cold weather has driven me to the house. This computer is quite the little rig isn't it. I have read all your comments and find them very interesting. But I find all your marketing views are antiquated 19th and 20th century ways to market commotidies. Ianben has the most forward thinking ideas on how to better market our grains. I know all of you believe that the commotities market is the only way to set a price. I believe their are better and simipler ways of pricing that are possibly more stable and more profitable for farms. Lets remove the speculator from our commotity market and replace it with a buyer takes delivery and a seller makes delivery on a sale. This would be a true supply and demand market. Now I don't want to hear all about how us farmers can farm these speculators and all the other so called good points about the exsisting market(which is manipulative}. Lets hear some clear thinking on how to change our commotities market to the benefit of farmers instead of favouring buyers of our product. Spectulators done give a damn where the price is, just that it is going up and then down. Everyone lets try to dream up a better way to market. Thats why this computer was invented someone or a lot of someones figured it out to better our lot in life. Heres to better thinking The Kernel.