Benifits of the CWB

[Incognito]

How many acres do you farm Almoy?

[AdamSmith]

Some of the “Benefits” to the open market are:

Transparency: This benefit would be considered my number one. The market doesn’t lie, yes we may not like what the market says to us sometimes but it doesn’t mislead you. And in my opinion it’s much better to have correct information rather than information that is manipulated for “other considerations”.

The price spreads between grades and classes of wheat from the CWB are one case in point. The CWB has established spreads that are disconnected from real world values they are set in a manner to always insure CWRS has the highest value. This is done because that’s what the CWB wants to promote. Earlier I posted the Portland cash prices and DNS had a lower value than HRW. Yet the equivalent wheat to HRW in Canada is at a $1./bu. Discount.

A couple of years ago I found out by talking to someone from the Anhauser Busch that they were paying more for six row than two row barley. The premium existed in six row yet the CWB signal was the opposite to what was real.

Under an open market system this won’t happen, it can’t happen. It’s called ARBITRAGE. Know this word and understand this word. It’s key to understanding how the open market functions and why it will always give you the right signal. Again you may not like that signal, you may even hate that signal, but it is the right one with correct information.

Arbitrage is also the answer to many of the “fears” propagated by the CWB. Farmers in the north won’t have to go south to get the world price, the price will come to them. Railways and Grain Companies can’t over charge for their services because once we are free to go where the better deal is they will have to compete with the lowest cost service providers. How much wheat do you think the mainline co’s will get if they keep their handling fees where they are today, once our choices in buyers includes American companies who only charge 5 to 10 cents per bu.? They either match it or they quit buying wheat. I’m 100% certain they will match it. But that will be their decision to make. Delivery is the same. If you can’t manage your logistics as well as the next guy, well your company will just miss out on a lot of business.

I’ve spoke about Value added before, once the real information and the real prices become available confident decisions can be made. Once value added investors have confidence about the rules and once they have confidence that they can make logistical arrangements these thing will happen. That can’t happen today because with the CWB you never know what the rules will be and you can never be assured of anything. The CWB can change the rules on a whim. In the open market everyone has equal opportunity but outcomes will be determined by individual skill and accomplishment.

[almoy]

We farm 1700 acres in an area that is mainly farms from 4-10000 acres. We do not have enough acres to get discounts on inputs or any pull with grain companies for delivery. I know of large farmers that the companies allow to over deliver BIG time as it is. With the wheat board gone I doubt if the small farmer will get to sell any grain on a year like this.

[chaffmeister]

Almoy – I’m wondering why you think the end of the CWB will lead to the end of the small farmer. It seems that even with the CWB, you are having the delivery difficulties that you think you’ll see without the CWB. So how is the CWB helping you now?

There is a clause in the Canada Grain Act that says that if an elevator is taking in grain of a particular class and grade, they MUST accept deliveries from anyone wanting to deliver. They cannot discriminate, accepting grain from some while turning others away. I know that nobody likes to threaten legal action – or even bring in the regulators – but there are provisions out there to help you. And if these don’t keep the playing field level for you, then they need more teeth. Not sure the CWB can help under the current environment, though.

Good luck.

[almoy]

With the CWB contract once a person contracts their grain they can usually deliver it. This year it seams they keep having more contract calls before a lot of people have the oppertunity to fill the ones that are open.

[AdamSmith]

Almoy, when I'm not satisfied with the level of service from one company or even one particular elevator point, one of my favorite things to do to is to go and do business with someone else. I also make sure to tell the offending parties what I did and why I did it. It's quite amazing how losing business (even a small amount of business) changes peoples perspective on things. Don't just assume it's the size of a farm that is the only thing that matters. If a company knows they can jack a person around they usually will, but once they know that there are negative consequences they become allot more accommodating and easier to deal with. Farmers don't have that very important lever at their disposal with the CWB. I have had to pull this lever many times in the past and I’m sure I will have to in the future. What chaffmeister says is true, I know a farmer who reminded a particular elevator manager about the Canada Grain Act when he arrived with a load of canola and was told “go home, were not taking canola today”. They had to take the canola and they knew it, and he knew it.

Another benefit to open market and that one is exclusive to the open market.

[almoy]

I have tried ALL the elevator companies within 100 miles. We are on a "waiting list". They all are buying only No.3. MY name never seems to come up to the top of their list for No 1 or 2.

[almoy]

I don't know where you all haul grain but around here you have to book in loads at any of the elevators. It saves someone from sending a load 50 -100 miles only to find out they filled up just before you got there.