This is what I've been talking about

[mcdon]

What is missing from the examples provided above is
that the US producers have a futures market that
works for the most part, Canadians don't. Like
comparing apples and oranges.

[westernvicki]

True. And a system at overcapacity, with minimal surge capacity add no pressure to the store and wait principle, unless of course you can wait until the whole world is short, which does indeed happen from time to time, but maybe not in time for the cash flow on your farm.

[bucket]

westernvicki

What I am getting from this lesson in how to do it right, is build more storage.

It will pay the farm's bills and return you a large profit.


The US farmers have more than 5 families bidding on grain, more delivery points, less snow, better winter weather generally, a better transportation system.

And most importantly, a government that doesn't allow the shit that goes on in western Canada to happen.

The STB/DOT is holding hearings in the northern tier states to continue finding solutions to the rail issues in the states. And they are not too far behind compared to the mess in Canada.

The US government is making every effort to ensure that fertilizer moves to where it is supposed to be.

The transportation system alone allows depape's system to make sense , as does the many local options as to where to sell grain in the states.

More importantly is that there are government delivery points/warehouses for farmers to store grain. You don't hear about late contracts in the states.

Not so in Canada.

[westernvicki]

We need a more efficient transportation system to get to the markets. including Maybe the CEREs terminal will help.

But John, investment in new storage works well for the USA because the US wants the farmers to hold their grain on farm longer to serve the market better which is more based upon domestic use. Great idea for their market. What works for us?

[bucket]

One other thought.

Build the bins, finance them through your banker.

I have never had a lender walk out and tap on them to see if they are full.

They assume they are, tell them they are full.

That should get you by for a while.

Full sarcasm.

[westernvicki]

Anyway have to run ... my point is Canadian farms have storage, but eventually you have to sell and then their is that GAP. I believe the only solution to the GAP is competition and access.

[westernvicki]

Another idea is to buy CN and CP shares and go to the annual meeting, and participate as a shareholder. I did.
Not a farmer their except me judging by the wealth of suits in the room.

[westernvicki]

The US does have a more proactive system, but indeed to the credit of the Province they are engaged; they need to be.

And anyone in government with privileged access to farm lending stats, can do the math: the GAP is too wide to support the debt on Canadian farms, so government needs to be motivated to act.

Hope springs eternal but we should have a plan... we need more infrastructure investment in rail to move to the market.

I believe this should be our lobby... anyway now I do have to run.

Good luck seeding, cold here, all dressed up warmly and no fields to seed.

[Rareearth]

The role, purpose, responsibility, of government is
to provide infrastructure.
The system is broken and controlled in a duo-
oploy environment, with private shareholders,
they will not invest the money required to build
over capacity (although it's the right thing to do)
it's about:
share price
Shareholder value

Vs

Interests of the nation, Canada

The USA has a competitive environment , water
and rail infrastructure, but with same shareholder
interests. The difference is they are competing for
market share!

The only solution is government intervention, they
would win many votes with significant change in
policy and legislation. It doesn't help to buy cars
anymore, they need to twin the highways, open
running rights? Then the trade will have to step
up with modern port loading.

[jdepape]

I'm going to be fairly blunt here - nothing personal.

Vicki - Re-read my posts. I've never said we don't have enough on-farm storage in Western Canada. What I have said is that the vast majority out there don't see it as the asset it is nor use it to its full potential. Far too many see on-farm storage as a liability.

A while back, someone here on Agriville said "why would I invest in bins just to have them sit empty, rattling in the wind for eight months of the year." My response - "how many weeks of the year does your combine sit idle?"

You throw out prices from this year to support your argument yet you know this is a unique year. You're complaining about price - but really it's about basis.

Our basis is not "set in like a wedge". Yes, our average CWRS basis is about 175 under right now and the US average basis is closer to 40 under - and that's an improvement over a few weeks ago. Last year about this time ours was 30 under and the US was 25 under.

Oh yeah - and you seem to forget that last year canola basis was as high as 15 <b>OVER</b>. How quickly we forget.

You want a solution that has value?

Read the article again. And think about this. Basis is the balance of supply and demand - both will influence where basis goes. Basis drops in a year like this because the supply (deliveries from the farm) is overwhelming the demand (ability to ship and execute sales).

Unfortunately, Western Canada has inherited a mindset that goes back over 60 years. Simply put - we seem to think that the farmer's job is to mindlessly feed the system - in an orderly fashion. That the demand pull changes from time to time, but the supply push is - by definition - a constant. From this comes the mindset that farmers have no influence over price. It's no wonder that some feel victimized and powerless - they see themselves locked into the role of price taker.

Because of the CWB, guys were forced to store but got nothing to show for it. So I understand why some farmers feel the way they do about storage - they need to change their thinking in this new market.

A top official at CWB told me that the greatest benefit of pooling is "getting the same price regardless of when you deliver". You see, they never got it.

And when farmers see the ability to wait for higher prices - your "store and wait principle" - as the only benefit to on-farm storage, well, that's a problem.

Hope is not a marketing plan.

The system works only as well as the participants act in it. Our markets remain dysfunctional because farmers generally do not act in the market in a rational way.

Last year, the canola market was SCREAMING to sell for spot delivery yet I know guys who were holding out for better prices, thinking the inverse was indicating the spot price was going higher. Wrong. I even know one guy that was going to carry his canola into the next crop year - through a $90/t inverse - because he was bullish.

This year, the canola market was SCREAMING to carry canola. But that doesn't mean to just hold it and wait.

In our hedge program we acted as the market had indicated and we have (so far) added about $1.00/bu to our clients' bottom line - just through earning the carry. Couldn't do it without storage.

So Vicki - as I've said here many times before - the solution is straight forward:
- use on-farm storage as a marketing asset
- get a better handle on cash flow, to avoid selling because you have to
- educate yourself on how grain traders react to the market

This won't get more railcars - that's another issue. But the low basis is because of farmer selling - and selling, and selling. If even a small portion chose to act according to market signals - and used their storage strategically, the basis would never have gotten so bad.

And I know I will get posts coming at me to say managing cash flow isn't as easy as I make it out to be. Sure - I get that. But while we sit around and blame everyone from the RRs, the grain companies and the govt for our problems, we are missing out on one of the greatest opportunities to come in a lifetime - a market without the CWB single desk. If cash flow is keeping you from making better marketing decisions, focus on improving it. Same goes for storage.

Marketing choice is not just the choice of who to sell to. With an open market, you have many, many choices on how to market your grain. But until we figure out how to employ storage in the whole marketing strategy, we're only scratching the surface of what can be done.

And in the meantime, gobs of money is being left on the table.

Vicki - your solution to what you call the GAP is competition. Sure, that works - you know I'm all for increased competition. But it won't help if farmers keep on selling when they shouldn't be. Basis will still drop and guys will still get upset that the system's broken - only because they feel ripped off by the grain companies.

How can you expect competition to work if you don't force them to compete?


mcdon - we have a working futures contract in canola. And although the Mpls wheat market was less than ideal, it wasn't working for any short hedger, regardless of which country.


bucket - I'm not saying you need to build more storage - at least use what you've got more profitably.