The StarPhoenix (Saskatoon)
8 February, 2007
by Rod Flaman
'Choice' doesn't confer marketing advantage
Following is the opinion of the writer, the CWB farmer elected director to represent District 8.
Twenty miles south of my farm in Edenwold, on the TransCanada Highway, there are three inland grain terminals owned by Saskatchewan Wheat Pool, Pioneer and Agricore United.
Much of the area's grain business is done at these terminals. They compete for both Canadian Wheat Board and non-board grains.
When local farmers have grain to sell, they probably start by calling these three companies to check what prices they offer. Farmers have this choice now and they would continue to have it whether or not the CWB exists.
The companies are free to compete on basis levels, grading, trucking premiums and handling charges.
These competitive factors will continue to exist with or without the board. This certainly represents choice, but it's not marketing.
Broader choices do exist in the area, with Terminal 22 at Balcarres, the Weyburn Inland Terminal, Cargill at Regina and AgPro at Moose Jaw.
The problem, however, is that the choice is illusory. Terminal 22 is run by Cargill. AgPro at Moose Jaw is an arm of the Wheat Pool. Furthermore, trucking to these locations is more costly.
How many more choices do we need? Converting the CWB into a small underfunded grain company without facilities will add nothing to this equation.
This cannot, and should not, be the substance of the marketing choice debate.
A few farmers want to export their grain directly to end users. This is marketing, and it's costly if you take it seriously.
The CWB is excellent at marketing and does it to more than 70 countries. It spends a lot of money on market development and promotion of branded Canadian products, and has a world class reputation.
The board is the major funder of the Canadian International Grains Institute in Winnipeg and continually brings in international customers to showcase CIGI's wheat and barley in the pilot mills, bakery, pasta plant and the malting and brewing technical centre.
Ongoing research and development is geared to promote use of Canadian grains in specific end-use products in customer countries.
Some individual farmers invest time and money to promote their products with end users as well, but these efforts are not in the same league as CWB's.
The choice by individual farmers to make these investments can give them a marketing advantage. Premiums created by individual farmers can be extracted from the marketplace through the CWB's producer direct sale.
If the selling price is higher than what the CWB would have obtained from that same market, the farmer keeps that premium.
Out of 65,000 farmers in Western Canada, only an extremely small number demand this opportunity.
Farmers who've identified such opportunities regularly use producer direct sales and are able to combine it with other CWB producer pricing options to capture market volatility and manage risks.
So, this, too, cannot be the substance of the marketing choice debate.
Who gets to sell Canadian wheat and barley to Canada's largest international customers such as the Japanese Food Agency, the China Oilseeds and Foodstuff Co., Bogasari Flour Mill in Indonesia, Warburton in the U.K. and other large customers around the world becomes the important question.
Will Canadian wheat and barley sold to these customers be available only through the board's single desk or should multinationals such as Cargill, ADM and Bunge be allowed to compete against the CWB to sell the same product?
Competition among a number of sellers to sell the same product does not drive up its price. The lowest bidder makes the sale.
That is why consumers, including farmers, highly favour competition. In this case the consumers are the millers, bakers and maltsters in countries with whom CWB does business. Competition in a marketing choice environment won't be good for farmers.
If the CWB is in competition with Cargill and ADM, it's no longer in the board's best interest to invest in market development because competitors would capture the value it creates by using farmers' money.
Under marketing choice, the CWB must depend on competitors to buy and move grain because it has no facilities. It will be difficult for the CWB to add value when the multinationals rake off all the profits for their shareholders and set handling charges for farmers who deal with the CWB.
This is the marketing choice which is the substance of the debate. If farmers understand that, the choice they'd make would be to continue to use the board as their marketing partner.
In the federal government's barley plebiscite, the preferred option is clearly identified with special wording that starts with, "I want." The alternatives start with: "The CWB should."
Canada's New Government has made glib remarks about a "strong CWB" in a marketing choice environment, but has shown absolutely no intention of allowing the board to strengthen its business or expand its mandate. It has muzzled the organization, fired its visionary CEO and put CWB haters on its board.
Every indication is that the government wants to peel the CWB like an onion, layer by layer, till it withers and dies. It makes you wonder what the government really has in mind for the farmers of Western Canada!
8 February, 2007
by Rod Flaman
'Choice' doesn't confer marketing advantage
Following is the opinion of the writer, the CWB farmer elected director to represent District 8.
Twenty miles south of my farm in Edenwold, on the TransCanada Highway, there are three inland grain terminals owned by Saskatchewan Wheat Pool, Pioneer and Agricore United.
Much of the area's grain business is done at these terminals. They compete for both Canadian Wheat Board and non-board grains.
When local farmers have grain to sell, they probably start by calling these three companies to check what prices they offer. Farmers have this choice now and they would continue to have it whether or not the CWB exists.
The companies are free to compete on basis levels, grading, trucking premiums and handling charges.
These competitive factors will continue to exist with or without the board. This certainly represents choice, but it's not marketing.
Broader choices do exist in the area, with Terminal 22 at Balcarres, the Weyburn Inland Terminal, Cargill at Regina and AgPro at Moose Jaw.
The problem, however, is that the choice is illusory. Terminal 22 is run by Cargill. AgPro at Moose Jaw is an arm of the Wheat Pool. Furthermore, trucking to these locations is more costly.
How many more choices do we need? Converting the CWB into a small underfunded grain company without facilities will add nothing to this equation.
This cannot, and should not, be the substance of the marketing choice debate.
A few farmers want to export their grain directly to end users. This is marketing, and it's costly if you take it seriously.
The CWB is excellent at marketing and does it to more than 70 countries. It spends a lot of money on market development and promotion of branded Canadian products, and has a world class reputation.
The board is the major funder of the Canadian International Grains Institute in Winnipeg and continually brings in international customers to showcase CIGI's wheat and barley in the pilot mills, bakery, pasta plant and the malting and brewing technical centre.
Ongoing research and development is geared to promote use of Canadian grains in specific end-use products in customer countries.
Some individual farmers invest time and money to promote their products with end users as well, but these efforts are not in the same league as CWB's.
The choice by individual farmers to make these investments can give them a marketing advantage. Premiums created by individual farmers can be extracted from the marketplace through the CWB's producer direct sale.
If the selling price is higher than what the CWB would have obtained from that same market, the farmer keeps that premium.
Out of 65,000 farmers in Western Canada, only an extremely small number demand this opportunity.
Farmers who've identified such opportunities regularly use producer direct sales and are able to combine it with other CWB producer pricing options to capture market volatility and manage risks.
So, this, too, cannot be the substance of the marketing choice debate.
Who gets to sell Canadian wheat and barley to Canada's largest international customers such as the Japanese Food Agency, the China Oilseeds and Foodstuff Co., Bogasari Flour Mill in Indonesia, Warburton in the U.K. and other large customers around the world becomes the important question.
Will Canadian wheat and barley sold to these customers be available only through the board's single desk or should multinationals such as Cargill, ADM and Bunge be allowed to compete against the CWB to sell the same product?
Competition among a number of sellers to sell the same product does not drive up its price. The lowest bidder makes the sale.
That is why consumers, including farmers, highly favour competition. In this case the consumers are the millers, bakers and maltsters in countries with whom CWB does business. Competition in a marketing choice environment won't be good for farmers.
If the CWB is in competition with Cargill and ADM, it's no longer in the board's best interest to invest in market development because competitors would capture the value it creates by using farmers' money.
Under marketing choice, the CWB must depend on competitors to buy and move grain because it has no facilities. It will be difficult for the CWB to add value when the multinationals rake off all the profits for their shareholders and set handling charges for farmers who deal with the CWB.
This is the marketing choice which is the substance of the debate. If farmers understand that, the choice they'd make would be to continue to use the board as their marketing partner.
In the federal government's barley plebiscite, the preferred option is clearly identified with special wording that starts with, "I want." The alternatives start with: "The CWB should."
Canada's New Government has made glib remarks about a "strong CWB" in a marketing choice environment, but has shown absolutely no intention of allowing the board to strengthen its business or expand its mandate. It has muzzled the organization, fired its visionary CEO and put CWB haters on its board.
Every indication is that the government wants to peel the CWB like an onion, layer by layer, till it withers and dies. It makes you wonder what the government really has in mind for the farmers of Western Canada!
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