David Schnell WB District # 8 Candidate

[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?