If the single desk is so effective - why is the CWB not using it domestically for feed barley and fe

[Incognito]

Why not excercise the market power on feedlots?

Vader ....what say you?

[TOM4CWB]

Incognito,

This is an issue of "Trade and Commerce".

THe CWB is not to be messing in "Agriculture"... but to regulate the export flow of commodities.

Intra-provincial trade is outside the CWB jurisdiction as far as regulations are concerned.

[Incognito]

Disagree...

Try shipping wheat to Ontario. Is that not inter-provincial?

Why is ok for farmers to sell barley and wheat to Alberta and lose the monopoly powers of the CWB to feedlots but not to Ontario wheat mills?

[wd9]

Or colored margarine into Ont and Que.

[JohnKenneth]

i heard once that it's political, i.e. they can't appear to be depressing the non-Board market. if i were a buyer got wind that they were offering large volumes to feed lots i'd step back and wait to buy any, which wouldn't be good for farmers around those areas.

that said, here's an example where i'm pretty sure they were selling feedgrains domestically. last winter/spring they called for a bunch of 4 durum but i never noticed any boats for it in the lineup, nor was there any export market demand for low-quality durum last year. for months prior to that feed mills and ethanol plants in sask were paying a good 50-80 cent/bu premium for durum, which growers who noticed wisely sold with both hands. seemed like the board finally caught up and figured it out.

[chaffmeister]

Incognito is simply baiting Vader to make a point. He knows the real answer – the one that Vader is avoiding (take note that he hasn’t posted on this thread). The CWB doesn’t play the domestic game because the single desk is ineffective - it can’t do anything but simply sell at the market (no premiums - just like in the domestic milling market). And competing against the farmers it’s supposed to be working for can never look good. (Imagine how you’d feel if you were trying to sell barley to a nearby feed mill to generate some cash flow but it wasn't interested because the CWB had sold to them already.)

As for not appearing to depress the non-CWB market, I guess there's a difference between doing something and appearing to do something. In this case, the CWB does indeed depress non-CWB markets (including canola) by the way they procure grain and when they don’t market grain (loads of feed wheat not being sold = lower domestic feed wheat prices; impotent barley exporting = cap on domestic prices) but a lot of people don’t really notice it for what it is. And I’m sure the CWB would like to keep it that way – why would it want to “appear” to be depressing prices? How many CWB-supporters of fence-sitters would change teams if they realized the CWB was costing them 50 cents/bu or more on CANOLA? And some similar amount on every bu of non-CWB wheat and barley?

[TOM4CWB]

CHaffmeister;

One of the most purturbing factors about CWB selling policy is to be noted on the series "A" failure to accept 100% of the grain offered.

How is this possible?

Can the CWB actually justify refusal of 20% of especially CWRS 1&2?

Why wouldn't they sell this grain that has been offered to them, when there is clearly a hot market begging for it?

What kind of distortions will this impact the domestic market with?

Lower new crop non-wheat prices avaliable as folks grow more non-wheat and plan for less wheat in 2007?

[agstar77]

Chaff, your explanations are very simpistic. You know very well if it wasn't the CWB it would be individual farmers competing with one another setting the price would there be a difference, maybe? Would producers get a higher price ,not likely.

[chaffmeister]

Agstar – the market sets the price – the interplay of buyer and sellers, responding to their own needs and outside market forces. Having multiple sellers does not mean the price drops – multiple buyers and multiple sellers is the foundation of a thriving market.

The CWB cannot squeeze out “premiums” in the domestic feed market.

In another thread, it was mentioned that Rick Steinke of the CWB was taking credit for higher domestic barley prices, because the CWB had been active selling barley on the export market. It works both ways – when the CWB is not selling export barley (because they can’t arbitrage the domestic market effectively), domestic prices don’t get the support of exports.

So without the CWB interfering with the interplay between the domestic and the export markets, yes, farmers would get a better average price. This is particularly true with barley.

I stand by my comments that non-CWB prices would be higher if the CWB bought and priced grain differently, allowing farmers to sell wheat malt barley as cash crops. Canola and other non-CWB grains bear the brunt of selling pressure for cash flow because the CWB is too wrapped up in controlling logistics that it has lost sight of what it’s meant to be doing – marketing wheat and barley for the benefit of farmers. There’s a reason why wheat acres are 2/3rds of what they were 20 years ago (down 10 million acres since 1987) – farmers need cash flow and the CWB doesn’t do it for them; talk to them – I have.

If I thought it’d do any good, I’d offer to spend a day with you and the CWB directors to explain it openly and frankly. But I have my doubts.

[agstar77]

The problem is the day of the multiple buyer is coming to an end . We now have a vertically integrated hog industry with a few large players. The Cattle industry will go the same way. We have Sask Wheat pool and Agricore trying to merge. Where are the multiple buyers that will compete for feedgrains? If you are counting on biofuels just remember that it is also dominated by a few large corporations. But there will be more sellers if you have your way. Doesn't logic dictate that when there are fewer buyers and more sellers the market will trend lower or can you defy market theory?

[craig]

Agstar number of buyers and sellers is not what determines price. It is supply and demand. If you followed your argument through you could suggest that there are also many less sellers now because there are less farmers all the time. The CWB cannot extract so called premiums out of the domestic market becase buyers can just go across the line. In today's export market you can also build the same case. I would suggest that this what we are seeing in the world market right now. Lots of customers are quite prepared to subsitute lower grades of wheat because in a high priced market they cannot afford those price premiums. Sadly the board tries to maintain historic price spreads and not pay back producers of CPS and winter wheat what the market place reflects.

[Braveheart]

I tend to think that market theory dictates that price is dependent on the AMOUNT of a commodity available in ratio to level of demand, not necessarily the number of sellers. Economics 101 would teach that as supply decreases prices rise to ration supply. Of course the opposite is true if supply increases. The number of buyers and sellers would have an effect if there was only one of one or the other.

Herein lies the ultimate weakness of your argument Agstar. The CWB is only a single desk seller from western Canada. The don't have a single desk for the world or even the rest of Canada. Wheat and barley can and does originate elsewhere in the world. So ultimately the CWB is merely a price taker and you can see that rather than a single desk seller, really, the CWB is merely a single desk buyer.

[chaffmeister]

Agstar, you are confusing Economic Theory and Competition Theory. Reread Craig and Braveheart's last postings - they explain the relevant economics quite nicely.

When you start talking about the impact of the number of players involved in a market, you're talking Competition Theory. An atomistic market - many buyers and sellers - is best for efficiency and price transparency. At either end of the spectrum is monopoly and monopsony. As a market gets further away from atomistic and closer to either of the "mono's", it will continue to work efficiently over a broad range of scenarios until you get to a point where there is concentration of market power among one or more players.

Competition regulators use competition measurements such as the C4 index - a measure of market concentration among the 4 largest players. I have seen situations where the C4 was 100% - that is there were only 4 players on one side of the market - yet the regulators were not concerned because each was about the same size (no one was dominant) and there were no signs of artificial pricing or predatory actions among them. In other words, they competed.

So Agstar, you see, it's not linear. Simply moving to fewer and larger players does not in itself mean the market is working less and less well. You may be right about the concentration and market dominance in the hog industry, but last time I looked there were an awful lot of feed barley buyers out there - feed lots, feed mills, hog barns.

[Braveheart]

Chaffmeister, what an excellent explanation, and completely relevant to this discussion. That is the kind of experience and knowledge a CWB director should have. Would you like to have your name put forward as a nominee for the vacant appointed position?

[chaffmeister]

"Go ahead. Make my day."