David Schnell WB District # 8 Candidate

[chuckChuck]

Mr. Chaff,
I answer several of your quotes below:

"When maltsters tell the CWB and the Federal Government that they will not invest another dime in malt processing in Canada because of the involvement of the CWB, are they any different than Prairie Pasta"

Do you think it might have something to do with being able to buy cheaper in the US or from other sources?

"Why do you think Barilla built the world’s largest pasta plant in Ames, Iowa and not in Moose Jaw, SK? Why would they get locked into an unfeasible arrangement with the CWB by locating in Canada when, from Ames, IA, they can source directly from American farmers as well as from the CWB?"

I don't confess to being an expert on processing like yourself, but I am assuming there are a number of factors not just the CWB. Wages, transportation, labour supply, easier access to larger US market with no border issues, tax incentives to name just a few. Perhaps again it has to do with pricing out of the US. Considering that it was widely reported that US farmers sold the majority of their durum in 2007 off the combine in August and Sept at $7.00 USD While the CWB's PRO is currently around $12.00. That would seem to indicate if you were a buyer perhaps it is cheaper to buy US durum. Since the CWB was holding most of the exportable stocks in the world in 2007/08, don't you think they would be asking significant values over what US farmers wanted off the combine?

"You fail to mention that, later on, Prairie Pasta negotiated with Dakota Growers in Carrington, ND in a bid to be the Canadian arm of Dakota Growers. (Again, take note – buying into current capacity rather than building new.) At first the CWB gave this arrangement the nod, even coming up with a New Generation Coop policy that would have facilitated it. But when it came right down to it (at the last minute), the CWB backed down and refused to allow it."

Was it realistic to expect American farmers to tolerate Canadian farmers joining and openly supplying a US mill? I doubt that it was very popular with US farmers. Their record on Canadian wheat imports is clearly not supportive.

"Your comment “Nobody was building extra plants especially at a distance from the majority of consumers on the east or west coast” tells a lot about your understanding of the processing sector. Carrington, North Dakota; Grand Forks, North Dakota; Minot, North Dakota (milling); Spokane, Washington; Ames, IA. Not real close to the “majority of consumers”, are they? That idea is so old it’s got grey hair."

So transport costs have no bearing on markets? What is the cost of shipping a tonne of macoroni to New York versus a tonne of durum from Regina. Don't you think it might me be more proftable to be located closer to New York if you are shipping macaroni?

"Using your logic about proximity to consumers, could you explain how we can export durum to Italy and import pasta back to Canada? Those plants in Italy aren’t real close to their Canadian consumers are they?"

In order to understand why this is happening you need to know what market segment they are selling into and what volume. I suspect they are selling higher quality and lower volumes at higher prices than US pasta producers. Again there are many factors not just one.

"If the CWB was really working for the Canadian farm sector, it would be actively supporting, pursuing and assisting the development of processing in Canada with the goal of becoming net exporters of pasta, beer, and cookies, instead of durum, barley and wheat."

CWB's mandate is maximizing returns to producers. Increasing processing is a good idea but it has to work economically and has traditionally been the role of the private sector not government agencies. Are you advocating a greater role for government?

"Are you aware that flour imports into Canada are growing? Multinational millers here are grinding less in Canada and importing from their own plants in the US instead. What does that tell you about the investment environment in Canada?"

Again there will be many factors if this is true. It is very convenient for you to blame the CWB for everything but that doesn't make sense unless you have a got a big anti CWB axe to grind.

[charliep]

Will leave for chaffmeister to answer questions but I have to take note of the following quote.

"Considering that it was widely reported that US farmers sold the majority of their durum in 2007 off the combine in August and Sept at $7.00 USD While the CWB's PRO is currently around $12.00. That would seem to indicate if you were a buyer perhaps it is cheaper to buy US durum. Since the CWB was holding most of the exportable stocks in the world in 2007/08, don't you think they would be asking significant values over what US farmers wanted off the combine?"

1) The evidence is presented on page 6 and I have to admit to being curious as to how determined. I note the market signals from the PRO lagged the real price US farmers recieved but yet the average pooled price was higher. The exact process that led to this conclusion has never been documented by the CWB.

2) Not a durum issue because virtually no one signs durum fpc contracts. For other wheats, however, the vast majority of farmers (90 % of 3.4 mln tonnes) priced out their contracts for $7/bu or less (CWB year end presentation). On both sides of the border, farmers make business decisions to capture profit, generate cash flow and manage bin space.

3) If a person accepts the arguments around fall 2007 pricing US versus Canada, should I be able to apply the same process in 2008. My guess (could be wrong) is any business who forward wheat will be money ahead in 2008/09. If US farmers used the same process of forward selling wheat aggressively off the combine, they will put more money in their pocket than the CWB who held back sales.

[charliep]

page 6 of the most recent grain matters.

[charliep]

I also note the comment about maximizing returns to farmers and the role of government. Perhaps the role of government is to ensure a fair price that both farmers and processors can do business at. Perhaps you will disagree but the CWB price offered domestic human consumption wheat and malt barley is North American competitive price - the CWB treads the line between best price for farmers and where domestic processors can buy wheat/barley elsewhere (which as chaffmeister says, they are both from the US and increased wheat production Ontario.

Will see if chuckChuck is familiar with the CWB sales department return to pool tables. The table is a rating of customers (international and domestic)on any given day with regards to what they pay converted back to the prairies. The objective of developing a domestic valued added industry should be to provide an alternative for the lowest valued customers on this list.

The question is does the current system provide the market signals and supply chain coordination to meet the needs of someone making a major investment in western Canadian processing capacity? Would you invest in a processing venture that had one supplier of a major input to your plant?

[LWeber]

The original plan:

http://www.weyburnreview.com/News/1998/9841/cwb.html

Roderick Flaman
The CWB Act, Section 5, says the board is incorporated with the object of marketing in an orderly manner, in interprovincial and export trade, grain grown in Canada. Section 7 says subject to the regulations, the board shall sell and dispose of grain acquired by it pursuant to its operations under this Act for such prices as it considers reasonable with the object of promoting the sale of grain produced in Canada in world markets.

These two mandates of the board are entirely wrong. The CWB must be legally required to maximize returns to the producer.

The board must be open and accountable to producers. Any information required to protect the CWB's marketing position must be controlled by Canada's Access to Information Act.

The board must have the maximum flexibility to use marketing instruments and payment options to respond to producer's requirements.

The CWB must promote value-added processing on the Prairies to increase domestic consumption. This will insulate the producers from ups and downs of the world commodity markets and will increase economic activity and employment here on the Prairies.

The grain and transportation companies must serve the producers in a competitive manner. They must be bound by contract in the performance of their role in grain handling and transportation. Producers must no longer be held financially accountable for problems which are completely out of their control.

[BarleyGuy]

Chuck,

Why would anyone want invest in value added processing in Western Canada where the CWB is the only game in town and can impose not only price but reams of bureacracy, regulations, and paperwork that constantly distracts processors from the really important job which is processing and marketing products made from Western Canadian wheat or barley. There is a definite advantage to being outside the DA which is why nothing of significance has been built within the DA for the past 15 years.

[chuckChuck]

If the situation is so bad for processors, how do the existing mills and malsters in Canada operate profitably? How come there is not alot of secondary and advanced food processing happening on the prairies in all the other food products we produce that are not controlled by the CWB? What happened to all the meat processing capacity in Manitoba and Saskatchewan? Who owns and controls the Alberta based meet processing industry? Is it owned by ranchers? Why have ranchers been unsuccesful in owning and operating their own meat processing capacity?

If I am a producer of any product, grain in this case, having the ability to influence selling price is a good thing. In any business having a monopoly or near monopoly selling position is a desired business objective. Most businesses strive to reduce competition not increase it as being proposed by all those who oppose the CWB monopoly.

[FarmRanger]

The CWB has the ability to shut other buyers of prairie durum out of the market. With potential local buyers shut out by the single state legislated buyer, our durum is far more likely to get exported with all the extra transportation and handling costs. Even if they paid the same price, there would at least be a smaller supply to export by the board (less supply = higher price)

Without going into the ethics of forced property confiscation in a free country, this situation has lead to fewer buyers of local durum. And this helps us how?

[chaffmeister]

chuckChuck asks: “If the situation is so bad for processors, how do the existing mills and malsters in Canada operate profitably?”

Let me answer that using maltsters as an example. Most malt business is done on the basis of back-to-back business. This means that the maltster buys barley from the CWB only to satisfy a sale of malt to a brewery, either here in Canada or offshore. The CWB prefers it this way and actually will penalize a maltster for shorting the market (selling to a brewer without covering it from the CWB) or it will not sell to the maltster without a sale to a brewer.
So the maltster’s margin is set upon putting the deal together. Take note that the brewer is also impacted by CWB decisions.

On offshore malt business, the CWB knows that the maltster needs to be competitive with other maltsters in other countries. If they aren’t, then the maltster loses the malt sale and the CWB (the farmer) loses the barley sale. The CWB needs to be competitive – no monopoly power here is going to get better prices because the CWB isn’t selling the malt.

But here’s the problem. The maltster doesn’t set the price to the farmer. So, there have been a few times when feed barley prices have rallied and threatened CWB malt prices. When this happens, even though the maltster has contracted for the barley from the CWB, he has little influence over the farmer. In 01-02 two cargoes of Danish malt barley was brought in (at huge expense) because the local feed market was strong enough to dry up the flow of malt barley into the maltsters at PRO prices.

When you can’t feed your plant, how profitable can you be?

When you know that this is the market structure in Canada, why would you build or expand?

Bottom line is the CWB does not help the Canadian malt industry (it impedes it), and it provides no benefit to farmers of malt barley.


chuckChuck asks: “If I am a producer of any product, grain in this case, having the ability to influence selling price is a good thing.”

True. If you are suggesting the CWB has this power, either you are wrong because they don’t do it in practice, or you’re right BUT they don’t do it in practice.


chuckChuck asks: “In any business having a monopoly or near monopoly selling position is a desired business objective.”

If you’re suggesting the CWB has a “monopoly selling position”, you’d be wrong.

chuckChuck says: “Most businesses strive to reduce competition not increase it as being proposed by all those who oppose the CWB monopoly.”

This is the nub of the problem. You guys just don’t listen. Those asking for a voluntary CWB want to INCREASE competition. Competition for their grain. The CWB single desk ensures there is no competition for the grain and it does nothing to reduce competition from other countries as you suggest. Take note of what is happening in the durum market right now, even though the CWB has over 50% of world trade in durum:

Durum PRO drops $37/tonne in one month. (down $116 since first PRO in Feb)

“Durum prices moved lower during the past month, following the general trend in wheat prices. Supplies of durum wheat are significantly larger than last year, especially in the two major exporters, North America and Europe. A large European crop and slow export demand have pressured prices in the Mediterranean region. World durum demand remains slow, as most importing countries are still using domestic supplies. Demand is expected to improve as these supplies begin to diminish. The drop in spring wheat prices has also contributed to the lower durum outlook as the spread between the two commodities remains historically high.”
CWB statement with October 23rd pool announcement.

Where’s the “monopoly selling position” and how’s it working for you?