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

[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.

[winwin]

Bsigg;And yet---and yet cwb acres continue to drop and EVERYTHING else seems to grow! Specials,oils,feeds,oats,processing.

Did i say processing?But strangely only outside the cwb control.

It seems nothing grows in the darkness.But thats what we want.isn't it comrade?Darkness,control,decline.Just what we've always achieved with central control.Everywhere else it has been tried.It will always be so,comrade.

[charliep]

Curious.

Point number # 2. The CWB publishes the same feed barley numbers as the Agricore United every week in the Western Producer. Current values are in the USD $182 to $185/tonne area last week Western Producer. Both organizations are (CWB and Agricore) are the same - they are presenting accurate information or both are not telling the truth - their prices are the same. Perhaps the common is neither are selling so both prices are theoretical.

Not going to comment on studies. Need to show the money - not the promise.

Perhaps you can enlighten me on basis. I note that the CWB has effectively types of basis. CWB deductions as applies to payments. Basis on sales the CWB sales department has completed. Basis as applied to the producer pricing options. Canola has one basis which can be analyzed relatively easily.

[chaffmeister]

Agstar:

Don’t take this too personally, and with all due respect, is english a second language for you?

To make things clear, allow me to parse your questions:

<i>“if not selling to the U.S. raises their price…”</i>
Who said this? (I didn’t; I don’t believe it works that way.)

<i>“…what does it do for us if we don't sell into that market.”</i>
Not sure what you’re asking. Seems like you’re saying if we don’t sell into that market, then their price goes up – but we don’t benefit because we didn’t sell. So what does it do for us? Is that it? Is that what you’re asking?

Perhaps you should give my earlier post another read.

<i>“Are you telling me that if ADM or Cargill could buy at their own price in Canada it would be better?” </i>
I’m not telling you anything about anyone “buying at their own price”. Again, suggest you reread my post.

In a nutshell, my point is this – when the CWB sells, the “market” doesn’t have a chance to react to the buying interest. This mutes any positive price action that would have taken place in an open market. (In any "normal" market, fresh buying pushes prices higher.) The CWB's customers can (and do) take advantage of this feature of the CWB system for their own benefit. (another reason they like the CWB system the way it is.) And I don’t believe for a minute that anyone at the CWB (1) understands this and (2) would even know how to evaluate it (price it into negotiations).

To put an even blunter point on it – the CWB’s marketing approach weighs on market prices. Buyers like that. The CWB doesn’t understand it.

Comprenez?

[chaffmeister]

bsigg:

Here's answers to some of your questions. (Not all of them because some of them don't really deserve a response.)

<i>What has the competition bureau done about the Agricore United merger? </i>
Forced the sale of a number of elevators in the prairies.
Forced the sale of a terminal.

<i>What has the competition bureau done about any merger that has occurred in any industry? </i>
Don’t know about other industries, but perhaps you are not aware of the JRI / SWP joint venture in Vancouver. The competition bureau blocked it. JRI & SWP are appealing and the tribunal is still pending.

<i>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? </i>
Do you really think the wheat growers have any influence with the competition bureau?

<i>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. </i>
Charlie answered this one very well already.

<i>Many studies have show that the CWB provides premiums over the open market.</i>
Not sure how many times this has to be said before it sinks in but here goes again anyway. The studies to which you refer prove nothing. They have been shown to be flawed by experts in grain marketing. Not just flawed, actually flat out wrong in some cases. I know you choose not to believe this but, its true.

<i>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. </i>
This demonstrates very clearly why this debate goes on and on. Its because many of those that are arguing for the single desk really don’t understand much about markets – this comment proves it.

Either you don’t understand or you do but are intentionally trying to …..naw, forget it. You really don’t understand.

[gregpet]

I do enjoy all the back and forth debate but most people are very entrenched in their views and will not change their position even if they are proven to be wrong. All I can say is that a lot of information about how the CWB operates and these invisible premiums they get for us will come to light after April 1st when the CWB is finally subject to the access to information act. Not a moment too soon.

[agstar77]

Perhaps I should have said , how would you suggest the CWB sell into the U.S. market so that prices rally ? Don't you think other sellers know when Millers are dealing with CWB? They obviously know the amounts that the Mills require. Are they that stupid? I have listened to a Cargill rep say they like the consistency of product they get from the CWB and are willing but cautious in paying extra for this consistency. This should raise the price U.S. farmers get if they could get their act together. U.S. farm groups envy our system and wish to destroy it.

[jensend]

i think it's time to get rid of the cwb and let grain farmers move on to the real problems in the grain industry.

[chaffmeister]

Agstar:

Here's another shot at it:

<i>Perhaps I should have said, how would you suggest the CWB sell into the U.S. market so that prices rally ?</i>
First, if you think you’re a grain company, act like one. When a buyer comes in for large amounts, sell on a basis only. Why would you take on the flat price risk of a large sale – why would you expect farmers to? (This is Tom4CWB’s issue.) The CWB always says it sells throughout the year so as to get a good average. What that means is that it should price only when it’s being shipped. If shipments are made evenly throughout the year, so should the pricing. (You wouldn’t get caught selling too much too early – like this year.)

<i>Don't you think other sellers know when Millers are dealing with CWB? </i>
Nope. When someone wants to take advantage of the CWB system to get coverage quickly and without making a ripple on the market, you can be certain that they don’t advertise it.

<i>They obviously know the amounts that the Mills require. Are they that stupid? </i>
Yes, they probably know what each mill needs. But as I said, the mills don’t advertise their activities nor their coverage.

<i>I have listened to a Cargill rep say they like the consistency of product they get from the CWB and are willing but cautious in paying extra for this consistency. </i>
I have listened to reps say they like buying from the CWB because they can cover large amounts of their demand without lifting the market.</i>

<i>This should raise the price U.S. farmers get if they could get their act together. U.S. farm groups envy our system and wish to destroy it.</i>
US farm groups feel the CWB is selling below the “market”. Don’t think “envy”is the word they use.
If the CWB becomes voluntary, why not get extra market clout by inviting members of the US farm groups to market through the CWB?

[agstar77]

Could you explain the advantage ,for the CWB , to sell as a basis contract? How would that send a positive message to the markets?

[chaffmeister]

bsigg:

You said:
In the U.S., 60% of the commodity prices are paid in government subsidizes.

The CWB says:
In 2000, American wheat producers received 49 per cent of their income from subsidies.

http://www.cwb.ca/public/en/about/myths/


Thought you'd like to know.