Greg Arason's presentation to the House of Commons Ag. Committee

[Fransisco]

By the way, I consider myself a Pro not an Anti.

Pro Choice
and
Pro Wheat Board

I am not interested in killing the board, just in having choice.

[silverback]

Just sell your bin of feed barley and you will never have to worry about grain again.

[chaffmeister]

Agstar77 says "the large mills do pay top dollar for consistent large volumes"

Let's say a big milling company - let's call it ADM for short - gets bullish and wants to cover a lot of its wheat needs for the whole year. Because they operate in both Canada and the US, they have two options.

Option (1) - buy from "the trade" in the US.
Option (2) - buy from the CWB in Canada.

If they go with door #1, they are showing a great deal of buying interest to the market. Market reacts - prices move higher.

If they go with door #2, the only one knowing there is a great deal of buying interest is the CWB. CWB action in the market - zero. Market reaction - zero. (No demand-driven price rally.)

This also applies to many smaller sales - not just one big one. (It's easier to explain it with one big one though.)

So Agstar, when a CWB customer like ADM or ConAgra (or China even) comes in for a large amount of wheat, how does the CWB or its directors know whether its a good price or not? <b>Can they determine during negotiations how much of a price rally they might be keeping from the market? Do they then factor that into the price? Do they factor that into the potential prices of future sales?</b> (I don't think so. I've seen the way the CWB offers deferred positions - spot price plus a bit of a carrying charge - which will not catch the kind of price move we are talking about here.)

So its very possible (no, likely) that when the CWB sells large amounts of wheat it actually mutes a market rally - which would be useful for both the sale its making and future ones.

Do CWB-sponsored studies take this into account in their modeling?

Futures markets 301: A fully functioning (futures) market must feel the impact of all buying and all selling. Otherwise, it is not a true reflection of the market.

[kamichel]

Sorta like the Saint Lawrence asking price advertised in the Western Producer. Do they ever sell grain close to those prices?

[bsigg]

As you all know grain companies merge all the time, making bigger more powerful grain companies, every 3-5 years maybe longer. There has recently been a deal in the works between Richardson International and Agricore United. Before that Agricore merged with United Grain Growers to form Agricore United. Before that Alberta Pool merged with Manitoba Pool to form Agricore. Within 15 years or so ADM and Cargill will likely be the only grain companies left as they will have acquired all the other smaller companies.

Every few years these companies get bigger and more powerful and we the farmers are left with less ‘choice.’

ADM and Cargill have a long history of price-manipulation, price-fixing, and environmental destruction. Cargill and ADM are also recipients of large government subsidizes in the U.S.

Cargill in 1984 announced that it would import 1 million bushels of Argentinean Wheat into the U.S. market in order to lower the price. ADM and Cargill also though their government connections passed many polices that have hurt U.S. farmers. One of them was to remove the cap on how low grain prices could go.

I know you guys want choice, but if the CWB has to compete with these large grain companies, the grain companies will do or say anything to get the CWB out of their way. The CWB is the only thing that stands between the other 20% of global grain trading.

Another thing is that it is close to impossible to market your own grain, most likely you will have a grain company market your grain for you. So instead of the CWB marketing your grain, large grain companies that don’t give a damn about you will be doing it.

What part of going from single-desk selling, to single-desk buying sounds appealing to you?

The CWB extracts premiums higher than you would get on an open market. The CWBs operational costs are almost negligible, compared to the benefits.

The large companies have way more money that the CWB will ever have, how did they get all that money? It wasn’t from writing big cheques to farmers. It was from price-fixing, price manipulation, and corporate welfare.

[chaffmeister]

Bsigg:

Sorry, but perhaps you haven’t been keeping up on a few important facts/figures:

1. I know it may seem like there will only be ADM and Cargill left in the grain handling business, but I am confident that the Competition Bureau will ensure that doesn’t happen.

2. Ten years ago there were 19 elevator companies in the prairies – now there are 35. The largest 4 have less market share than before.

3. The grain companies are not “saying or doing anything to get the CWB out of their way”. Read my posting a couple above yours on this thread. The way the CWB markets grain is a good thing for these processors. They have no reason to get rid of the CWB. As for grain handling companies, they make more money handling CWB grains than anything else. Again – why would they want to get rid of the CWB?

4. There is no verifiable evidence proving the CWB gets “premiums higher than you would get on an open market”. None. Zero. Zip. Nada.
5. The CWB operational costs are not “almost negligible” – they’re huge. Don’t look only at the CWB “administration costs”. Verifiable public data shows that, farmers pay over $0.50 per bushel ($20.00 per tonne) to get wheat handled and shipped MORE than for canola. That’s over $300 million each year. Cost. Paid by farmers. Works out to around $100,000 for a 5,000 acre farm.

Still like your single desk?

[chaffmeister]

kamichel:

I believe the St. Lawrence prices in the Western Producer are domestic prices only - not export.

I have no reason to think that they don't get these prices. Usually.

[Burbert]

So, let me get this straight, now Mr. Arason is getting paid, he has become part of the conspiracy to subvert Canadian farmers??? Like wilagro said, Jesus himself could be addressing the House of Commons and he to, would be shouted down, truthiness seems to reign supreme, when it involves the CWB. By truthiness I mean, falsehoods, innuendo and untruths are the norm and to be believed. US buyers are standing in the wings, they need/want/demand that their country be flooded with Canadian grain, the sooner the better!! Let the open market rule all, highest bidder gets the food, to heck with the rest....

[agstar77]

Mr. Arason up on the 17. As the world turns. Stay tuned. By the way Chaff if not selling to the U.S. raises their price what does it do for us if we don't sell into that market. Are you telling me that if ADM or Cargill could buy at their own price in Canada it would be better? Sounds like really warped thinking.

[bsigg]

1. What has the competition bureau done about the Agricore United merger? What has the competition bureau done about any merger that has occurred in any industry? Do you think the Western Canadian Wheat Growers Association would make sure that the competition bureau investigates future Agricore United mergers, considering that Agricore United is one of their convention sponsors?

3. Just recently Agricore United came out and said they could pay a spot price of $233.70 per tonne for feed barley at Vancouver Port. Apparently Agricore United was making up nonsense in an attempt to convince people they are better off with ‘choice.’ Anyone can quote any prices as long as they don't have to pay it.

Some of these premium markets such as the one in Montana that Strahl and David Anderson keep talking about wouldn’t be there very long if all of a sudden, a bunch of farmers start delivering into those markets. It is basic supply and demand principles. When supplies are high prices go down. When supplies are low prices go up.

In the U.S., 60% of the commodity prices are paid in government subsidizes. Obviously the open market doesn’t work.

4. Many studies have show that the CWB provides premiums over the open market. Dr. Richard Gray, U of S; Dr. Troy Schmitz; Dr. Andrew Schmitz; Murray Fulton, U of S; Dr. Daryl Kraft and other have shown this to be true.

5. With Canola we pay a Basis of $45 per tonne and for what? The Basis doesn’t include shipping or handling or anything it is just there to rip us farmers off.