The Canadian Wheat Board

[lakenheath]

I hear you Parsley. One of the major problems with the CWB is that they are way too slow to change. Organics is the perfect example. Make the damn change. But, no. For some apparent rediculous reason, they won't make the change. It really makes you wonder.

And what blows my mind about Vader is that he is an organic grower.

[Incognito]

Parsley:

"guy will go stone-blind, if he once tries touching his single desk."

Is that like the Parable of the teenager and a woody?....LOL

[chaffmeister]

To get an export permit, DA farmers are forced to sell their wheat to the CWB and receive the initial price and then “buy-back” their wheat from the CWB at a price that the CWB considers to be the market price. The CWB indicates that the market price is the price that the CWB would have sold the same grain for in that same market. This way, the CWB argues, the pool remains intact; the independent farmer’s exporting activities do not dilute the pool since the sale goes through the pool, just as if the CWB sold the grain.

BUT – the CWB does not sell organic grain. So, on the buy-back for organic grain, the CWB argues that it simply sells the grain to the organic farmer/exporter at the price for conventional wheat in the same market as the organic wheat is being sold. According to the CWB, the “organic” farmer gets to keep the organic premium.

The CWB argues that it must do the buy-back on organic grain sales because if it allowed organic farmers to sell wheat directly, it would take away markets/sales from the pool. In other words, the sale of organic wheat would dilute the pool account; all other farmers in the pool would lose.

BUT – organic wheat doesn’t compete with conventional wheat. Organic wheat from Canada only competes with other organic wheat sources. The organic market is completely separate from the conventional market. There is no substitution, arbitrage, or competition. If an organic flour mill doesn’t like the price of organic wheat (or the quality, or he can’t seem to find any), he doesn’t buy conventional wheat and try to pass it off as organic. If a Western Canadian farmer sold organic wheat into California, it in no way would take away any sales opportunity from the CWB trying to sell conventional wheat into California. There is no way the CWB would ever lose the opportunity to sell into that market because some rogue organic farmer beat them to it. Nor would there be any price effect on conventional wheat.

THEREFORE – organic farmers selling wheat directly to organic markets would not deprive or deny the CWB any sales opportunities in any way whatsoever. It is impossible for sales of organic wheat to interfere with the CWB conventional sales program.

This is a no-brainer. The CWB contributes nothing to the organic market and is a tax on the Western Canadian organic farmer seriously diminishing his competitiveness.

[Vader]

I can only eat one loaf of bread at a time. One time that loaf might be organic and the next time that loaf might be conventional. I call that substitution.

[charliep]

Vader

Your belief is single desk selling (for export and domestic human consumption) is a necessity to offset the market power of large multi nationals. Won't say I agree but I'll set this discussion aside.

What impact does allowing direct access for farmers to smaller markets like organic (could be waxy barley for beta glucan or any number of the new alternative uses with specific trait based needs) on the overall CWB pool returns? If Canada needs to encourage entreneurship and development of higher valued products by farmers, shouldn't the CWB be encouraging this by minimizing its impact if it can't provide support in other ways?

[parsley]

Hmm. What about an Ontario loaf of bread?

Parsley

[lakenheath]

Vader,

You should be in politics. You talk around questions directed at you in some non-sensical analogous way. Cut the crap and give us direct answers.

[parsley]

lakenheath,

Is Vader implying that the CWB stops organics from directly entering the market (denying licenses)because organics steals market share from conventionals?

So, if organics does steal market share, does the CWB make Ontario go through the CWB as well,so the CWB can be the sole player? After all CWB wheat can be substituted with Ontario wheat.

Parsley

[parsley]

lakenheath,

Is Vader implying that the CWB stops organics from directly entering the market (denying licenses)because organics steals market share from conventionals?

So, if organics does steal market share, does the CWB make Ontario go through the CWB as well,so the CWB can be the sole player? After all CWB wheat can be substituted with Ontario wheat.

Parsley

[Vader]

I have been all around the organic issue before but for those who do not remember I will put some pieces of it forward again.

Regardless which market you talk about whether it be in Canada, US or elsewhere there is a premium for organic over conventional.

Anyone is free to find niche markets whether they be conventional or organic and if they can sell grain into that market for more money than the CWB would have sold the grain for in that market they are free to keep the entire premium.

So let us say that the CWB is selling wheat into the US market at $250.00 per tonne. If a producer finds a buyer who is willing to pay $300.00 per tonne then that producer is free to capture a $50.00 per tonne premium.

The method the CWB uses to ensure that the "pool" of Canadian wheat receives that value which the CWB would have gotten for it is to charge the producer who is wanting to make that sale the CWB selling price.

Under this system, which is commonly referred to as the producer direct sale, anyone be they organic or conventional is able to search out and exploit niche markets and keep whatever proceeds result from that marketing activity.

Producers who claim that the buy back is costing them money may be trying to make a sale into a market at a price lower than the CWB would have been able to achieve selling that same grain. If the producer wants to make the sale at a price lower than what the CWB would have made that sale for whatever loss is created will be borne solely by that producer.

Back to the organic case in particular.

As I said previously the organic producer is enabled and entitled to capture the entire premium of organic grain over conventional grain through the CWB producer direct sale. That premium should be what drives the economics of organic agriculture. If that premium is insufficient then perhaps there is no good economic reason for people to grow organic. If the producer needs more than the organic premium then he should look to some agency other than the CWB for the additional revenue to support his business.

But, having said all of that I think that I do have a solution.

I think that we should form a separate pool for milling wheat grading #1 and #2 and which is sold into our premium milling markets. Each producer would be allowed the opportunity to contract for a portion of that market. Obviously not everyone could sell all of the wheat that they can grow into that market. A system for allocating that market amongst producers would have to be devised. I have thought of a number of possibilities but I would like to know how producers might see this working. Each producer would receive a contract for a specific volume of grain to be sold into this market.

Not only would the economic deterrent of a producer direct sale be minimized, producers would now also see a much more realistic price signal from that marketplace. The ability of the pool to smooth prices over the course of the pool year would remain intact.

Lower quality grains would be sold into a "residual" wheat pool. If producers grew milling quality wheat over their contract they would be free to hold it over or to offer it inot the "residual" pool.

I use the term pool loosely because it may or may not be a pooled price. It could in fact be a fixed price contract or a basis contract. Any of the CWB's flexible pricing options could be used or in fact there could be whole new marketing options designed.

For grain outside of the "milling pool" there could be a cash pricing option with guaranteed delivery contracts.

The only firm committment in my mind is that the CWB remains the single desk seller of the grain. Everything else is on the table.

[parsley]

Vader,

Some organic comments first;

Organic prices are substantially higher than conventional. Many organic buyers have kept very precise record of the losses they have endured doing CWB buybacks,and many organic complaints have been publically documented.

Ontario organic producers, for example, simply pocket their entire organic profits, whilst an Alberta organic producer forfeits a cut of the profit to the CWB. Dealing with the CWB likens to dealing with the Mafia; both want a piece of the action. (You are probably very familiar with the Food for Oil fiasco, Vader. Each player got their cut).


Vader, with regards to your recommendations and musings, I question some of your suggestions for marketing/pooling wheat and barley. Can CWB et al even recognize a price signal? After all, price discovery is, practically absent,in Board grains in Canada.

New ideas are always welcome, but the degree to which they tilt is a bit unsettling. You have recently been obsessed with promoting a supply management system, complete with quotas,and production controls, all of which you publically condemned in an earlier life.

I recall reading your personal legal claim against the CWB itself, accusing that the Board's monopoly was a hoax, condemning the CWB's monopoly status in every press circle, demanding monetary compensation for the "harm" the monopoly imposed.

I am aghast listening to you completely reversing your stance, wandering about, from angrily condemning the CWB's single desk to wanting to guarantee a total single-desk stranglehold.

How you can expect that farmers should have confidence in flip-flop planning by CWB officials, which would profoundly impact upon a producer's basic life-goals process? It's astounding, to say the least. Two opposing systems! And you have championed both.

I realize job guarantees for the CWB staff is a priority, and the single desk may help realize maintaining those jobs, but you must have some concern that the single desk just might be on the cutting block.

Without the single desk, the CWB will continue to function very nearly the same, with the exception of those producers who do not offer their grain to the Board. And some staff will be gone.

Perhaps 2% of the total production would bypass the Board, certainly not enough to have a profound impact. After all, Ontario did it well. But they planned it well.

I hate to ever stymie innovation and new ideas, and I've always appreciated your inquiring mind, Vader, but at present, it only flows in the CWB's groove.

Be realistic and set the table again, Vader, and put the single desk as the centerpiece. It's up for discussion and you are smart enough to know it is.

Everything goes on the table.

Parsley

[Vader]

Parsley, you are right. I made some very strong statements back in the 90's. I was a very angry young man. I had virtually no understanding of the grain marketing system. I was looking for someone to blame and I painted the CWB with a very broad brush. I believed some of the bunk that goes around in the "conspiracy" circles.


Yes I protested. I went to court. I argued till I was blue in the face. Look who my mentor was at the time. What would you expect from an Art Mainil clone.

Then the opportunity came to work from the inside of the CWB instead of throwing rocks from the outside. I had to do some soul searching. I could not be a trojan horse as perhaps you and a few others had hoped. I could not run on the platform of destroying the CWB from the inside. What I did believe was that dual marketing was the solution to all of farmers problems and furthermore that dual marketing was in the best interest of the CWB. I still clung to the idea that the CWB could simply grant no-cost export licences to accomplish that goal. It would require that I convince my fellow directors.

Guess what? I found that single desk marketing actually earned farmers money and that it was the pooling system that frustrated farmers. I have found there are many legitimate reasons for pooling and I would never advocate taking that away from those who want to continue within a pooling system.

My job at the CWB is first and foremost to maximize returns to producers. I want to take that one step further and pledge a committment to make producers profitable. That would have an impact on everything that the CWB does. The CWB could not unilaterally raise wheat prices around the world but it would change the way we think and act enough that it might move the needle.

My second job is to be the eyes and ears of the farmers. I take that seriously as well. It is part of the reason why I post here.

I think everything else that I do falls back into category 1.

I know you would like to compare who I was back in '96 with who I am today and point out inconsistencies. Certainly I have changed. If have absorbed millions of facts since I was elected to the board of the CWB. During the first year I clung to my idealogies. Then I grew up. I admitted I was wrong and I renewed my search for solutions and improvements.

Your comments around the food for oil are unfounded and antagonistic. The CWB is not guilty by association. The CWB does not take a "cut" of the profits. You know that. The CWB returns all revenues from sales to producers. There are no retained earnings. The CWB has not built an asset base on the backs of farmers. Not even from the organic producers.

I know that the difference in price between conventional and organic is large. And I will say once again that organic producers are free to keep 100% of the premium that they can glean from the marketplace over what the CWB would have sold the same product for in the conventional market.

What organic producers receive from the CWB for the "conventional" value of the grain is the same for everyone. If that is insufficient and it certainly is then we need to address that problem on behalf of both organic and conventional producers. It is not an organic producer problem alone.

The grievance you have with the CWB is the same one I and every other producer has. That is the inability to be the master of our own destiny and decide which sale to make and which sale not to make. Those marketing decisions are all taken out of our hands through the pooling system. At least they were prior to the introduction of the producer pricing options. We simply need to add some more options. The pools are still too broad a tool. They need to cater to different markets. I suggested a "milling" pool and a "residual" pool. I think that I could build support for such an idea at the board table. In reality I would like to see pools that are even more "country" specific. For example, I would assume that every producer would want to sell 100% of their production to Japan if they could since it is our premier market. Ideally I would like to see a Japanese contract (or pool). If I could engineer such a program there might be those producers who would only grow a small amount of wheat on their farm for the Japanese market. I don't think separating the Japanese market and showing those returns individually is possible without releasing too much sensitive information. So perhaps lumping together the top 6 countries together would satisfy this need. Then the next 10 and then the next 20 etc. I know that there would be a contract or "pool" that I would find unattractive.

It is really all about pricing signals and the ability to manage ones own risk tolerance.

Certainly there are other problems that need to be addressed. I hope to see the roll out of a tradeable delivery pilot program in the new crop year that I have been advocating for the last three years. Again the current system takes away too much of a producers flexibility, and interferes with management decisions and cash flow.

I do not believe that the single desk needs to be sacrificed to satisfy the real economic needs of farmers.

I want to see the mandate of the CWB expanded to make it a stronger tool in the hands of farmers. Going back to the days when you say I did a "flip flop". I always said that the CWB is a tool and that it was in the hands of the robbers when it was controlled by three appointed commissioners. Today it is controlled by farmers and it is a valuable tool to be used to maximize the power of the farmers.