selling verses collecting

[TOM4CWB]

hgb,

I think it is great UFA is working to help us in the feed grain business.

I appreciate that many brokers work for every cent they get, and generally the last thing a broker wants is an unhappy farmer.

We sell direct because the price IS better. Obviously there is extra risk, and our capacity to deal with that risk effectively will determine if it is good for both ourselves and the buyer! No buyer goes intentionally broke, that owns a farm, that I have ever seen!

[wmoebis]

Makes me wonder how much grain is sold by the CWB to unlicensed domestic buyers and how much is never paid for. May have to phone and ask.

[charliep]

Is anyone from Ontario following this thread? Can you help us understand the Ontario system?

The following is the web link from Agri corp.

http://www.agricorp.com/brm/gfpp.asp

[charliep]

One more question. I understand the provincial pulse growers associations have had some significant discussions around this issue in the recent past. What issues were raised here? Are there any ideas being proposed? This is not to push for confidential information but rather get a sense of industry direction.

[TOM4CWB]

Charlie,

Here is the security part of the APG Risk Management Report:

"On the “Special Crops Industry Security Committee” file.

I am very hopeful that 2005-06 will bring a reasonable resolution to our “licensing and security deficit” which has plagued our industry for nearly a generation.

On January 13th 2005, The Canadian Grain Commission (CGC) has given us some assurance that new and reasonable tools will become available to resolve our CGC “licensing and security deficit”. These tools are as follows:

a) A new class of Special Crop primary elevator, which can coexist with seed cleaning facilities, will be created especially to accommodate our special crops industry by accomplishing the following:
i. Allow legal documentation to be created at the farm gate, when picked up by a truck, or upon delivery, of ungraded produce; of an official interim grain receipt. Official graded grain receipts then would be subsequently issued within a reasonable time period.
ii. Shrinkage and weigh over anomalies within the Special Crops primary elevator would be compensated for with exemptions where required.
iii. Interim or Graded grain receipts held by producers, in store at the Special Crops Primary Elevator would be accounted as owned by the producer, not a liability held against the Special Crops Primary Elevator licensee’s bond or security, until a cash ticket is issued.
b) The Export Development Corporation (EDC) recently started issuing special Accounts Receivable Insurance, to Special Crops Dealers and Elevators. This new EDC product generally allows better usage of “Lines Of Credit”(L.O.C.). When working as intended a purchase of $500K of EDC insurance to cover a CGC bond requirement, for example on a Dealer with $1 million L.O.C., it would be then possible to extend the L.O.C. $500K to $1.5 million, because there is an unconditional guarantee to the bank for $500K by EDC.
c) A reputable Global insurer is in final negotiations with the CGC, to provide Bond insurance at a reasonable cost, competitive to L.O.C.’s today, specifically tailored to each Grain Buyer. It is estimated that this new product could save the Canadian Grain Industry up to 30% of the cost of CGC Bonding today. This special insurance will be specific to the exact floating bond requirements of the licensee buying this insurance. The 100% Bond insurance would be issued to the CGC, and determined and paid out by the CGC to producers entitled to security upon a failure of that specific Licensee.

The above noted improvements when all implemented, allow me to believe that by August 1st 2006 we will have all special crops buyers licensed under the CGC who buy grain under the Canada Grain Act. This will then allow all farmers to be protected in a reasonable secure manner when selling to CGC Licensed grain buyers."

Charlie, cash sales are one thing.

Now we come to hedges or prepriced contracts.

None of the deferred delivery contracts are bonded.

Alberta Oats was a perfect example of where one farmer I know of, lost close to $300,000 of value from these priced contracted sales, without being compensated one cent.

At the end of the day, we must really know and trust those who we deal with... especially when we get into IP specialty contacts, that can only go one place!

We are getting into such a complex system... it is totally intimidating to the average farmer... to increase profit we must increase risk!

What a treadmill... no wonder concentration of the food sector is getting to be such an issue!

[charliep]

Thanks Tom4cwb for updating.

I note your comments about protection for forward contracts. What are others thoughts on this issue?

Just to note the comments from people who have involvement in different farmer organizations in this thread. I note there is general understanding of the issue and a willingness to review alternatives.

[wmoebis]

anything in the works that anyone knows of for end user feed grain. How can these guys and us producers protect ourselves? Some big intensive livestock opperators have a lot out on the books at one time and lots can happen in short order.

[TOM4CWB]

wmoebis;

I will take a run at this problem:

The Canada Grain Act in it's purpose states:

"Objects of the Commission

Objects
13. Subject to this Act and any directions to the Commission issued from time to time under this Act by the Governor in Council or the Minister, the Commission shall, in the interests of the grain producers, establish and maintain standards of quality for Canadian grain and regulate grain handling in Canada, to ensure a dependable commodity for domestic and export markets.

1970-71-72, c. 7, s. 11.

Functions of the Commission

Functions
14. (1) Subject to this Act, the Commission shall, in furtherance of its objects,

(a) recommend and establish grain grades and standards for those grades and implement a system of grading and inspection for Canadian grain to reflect adequately the quality of that grain and meet the need for efficient marketing in and outside Canada;"

Here is the official contact:


Contact
Fred Hodgkinson
Manager, Licensing
Telephone: 1-204-983-3309
Fax: 1-204-983-4654
Email: fhodgkinson@grainscanada.gc.ca

Now comes the excuses the CGC uses for not licensing Domestic buyers:

1. It has been argued that intraprovincial (trade of grain within the province) of produce that you grow, is a product of Agriculture within the province... constitutionally an issue not properly within the "Trade and Commerce" provisions constitutionally.
Theoretically the CGC and CWB only operate in "Interprovincial and Export markets" because of this factor.

2. Now comes the restricitive discipline of the CGC and CWB Acts, that one "normally" reading into them the "ordinary" meanings of the words, in which these two acts SHOULD mean that the buyer of your grain must recieve a license and provide you a bonded purchase opportunity. THE CWB Act providing for "Orderly marketing" certainly would ordinarily mean you should have been offered this opportunity.

AND it in fact COULD mean this, and did in fact mean it some 40 years ago. For instance the CWB then took total control over quota's on the intake side of intraprovincial feed mills. This control was sustained in Court Action and ruled legal.

The practical side:

The CGC/CWB duo have not been freindly at all to sellers of domestic feed grains.

CWB pricing is often 10-30% below what is offered direct in the domestic market... a principal reason you did not sell to the CWB in the first place.

If in fact, the CWB were truly doing it's job... of "orderly marketing" they would arbitage the domestic and interprovincial/export market. THis would be a VERY blunt marketing tool.

We as farmers have decided we do not want the CWB in this realm.

You ask how?

Simple... we sell outside of CGC/CWB parameters... and allow them the exemption.

But how could we "Force" the CWB/CGC duo into the principal in the domestic market place?

Simple, we would need to sell, by choice, all our feed grains to the CWB through licensed and bonded CGC dealers... then the domestic feed user would have no choice but to retrieve feed grain supplies from them.

Sorry, but we farmers ourselves are responsible for this mess!

And obviously there is no short cut... no easy profit... no risk free answer that extracts the maximum price for the grain farmer.

THis is the true ironic part of CWB retoric. The CWB says one thing but does the opposite!

As Dr. Soon-Bin Neuh said last Friday to the CWB directors, and shared with everyone in Saskatoon at the CWB Day:

The CWB cannot be a Priest and a Playboy at the same time.

Yet they pretend... and we all pay a massive price... for this deception.

3. In fact innovative leadership could provide you, wmoebis with a high return CWB/CGC assured return for your domestic feed grain sales... if they chose to truly maximise our returns as feed grain producers.

BUT wmoebis;

Do you think they have any intention of doing this?

Do you think the CWB Minister would allow this?

NO WAY.

The result is, We have the worst of both worlds.

Finally:

Don't be decieved: Being offered something for nothing; usually means it costs you extra to get nothing in the end!

A perfect discription of the CWB "Single Desk"!

And you can quote me! TOM4CWB

[charliep]

wmoebis

From the perspective I see at AAFRD, we are not getting the pressure for change/bonding on the feed grain side that we are from the pulse industry. I don't know if a neighbor to neighbor transaction and people want to keep government out or what. I have to seek advice.

The issue from the buyer side has always been the cost of bonding/letters of credit. The CGC/others have been looking at lower cost alternatives. There has also been the insurance concept where the seller pays a cost but again hasn't seemed to be popular.

Finally use of brokers/marketing representatives. The industry is very small and information flows freely (particularly issues around buyers in financial trouble). The individual/company you are working with should be tuned into this (assuming they are working for your interests) and provide feedback. I am assuming a broker who works for a fee and not a re-seller/someone who takes ownership of your grain. Not perfect but a system that works reasonably well.