Frisco won't like this, as the source is from a publisher who recently fired one of his closest couleges:
SOURCE: MANITOBA COOPERATOR,
DATE; APRIL 5, 2007
EDITORAL: JOHN MORRISS
Farmers have spoken. The challenges will continue, including the legal one of whether the Canadian Wheat Board's authority over barley can be changed without legislation. Regardless of your view on the outcome, it's impossible to argue that things should be done outside the law.
But the reality remains - those who argued that a "dual market" is impossible for barley have failed. Most farmers who voted for a dual system must surely have known they were risking an end to the CWB's role in marketing barley. It's hard to imagine that almost half the farmers who voted hadn't heard that message. If you combine them with the 13.8 per cent who voted for a complete end to the board's involvement, you have 62.2 per cent of farmers who do not believe that a monopoly provides any benefit.
That may be hard to understand. Relatively speaking, malting barley is already one of the most profitable crops on the Prairies. The current PRO for Manitoba of $3.23 per bushel times last year's StatsCan yield of 63 bushels yields a return of $203 per acre, compared to MAFRI's estimated cash costs of $112.75.
A decent price for barley will not be much of an imposition for beer drinkers. You can make 333 bottles of beer out of a bushel of barley, which makes the farmer's share about ninetenths of a cent. A change to the CWB's authority will not create more beer drinkers, and therefore markets for malting barley, which is the main economic issue at stake. Under the current system, anyone who wants to buy Prairie malting barley has to buy it from the CWB, which has used its monopoly power to extract hefty premiums over feed. But the board doesn't actually handle that barley - that's done by the elevator companies. When the monopoly ends, those companies cease to become the board's agents, and become competitors - with the board, with each other and with farmers. This will mean the end of the system under which all barley selected for malting must be purchased directly from farmers. Grain elevator companies who happen to end up with some nice barley purchased as feed will be able to sell it for malting. Since there's no official grade for malting barley, farmers can't get a third-party ruling from the grain commission and insist on being paid for it, as they can for regular grades.
It's hard to imagine that competition for markets won't drive the price down, but most farmers don't seem to see it that way. They believe that the companies will compete with each other to drive the price up. We'll never know for sure. Through the board system we know exactly how much malting barley was sold, what it sold for, and its premium over feed. Such exact statistics will cease to become available when the board monopoly ends, just as they ceased for selected oats when the board had the monopoly over milling and export sales. Over its eight years before the CWB lost its jurisdiction for oats, the selected pool delivered an average premium of $46 over feed. What's the premium for milling oats now? That's uncertain, but few seem to have complained.
So it's time to move on. Single-desk supporters need to quit fighting this battle, at least for barley. Similarly, those who have argued for a "dual market" should quit claiming the board can stay in the business. The only way that can happen is if the initial payment is so high that farmers will choose it over a cash price. Neither the finance department or the board's grain company competitors will stand for that, and a pool account loss would trigger a WTO challenge. If the board offers a cash option, then the grain companies, whose services will have to be contracted by the board and farmers, will make sure that it's more attractive to do business with them instead. Either way, the board looks bad, and the dual market forces will use that as evidence in their battle to remove the monopoly on wheat.
The only question now is when to do this. For legal and logistical reasons, August 1 may be too soon. Announce it will be done, introduce the legislation and then plan for an orderly transition for August 2008. That way everyone, including customers (who have so far been left out of this debate) can be certain about what will happen and plan accordingly.
It's time to quit arguing about this and just get on with business. If farmers don't think a sales monopoly is serving their interests, so be it.
SOURCE: MANITOBA COOPERATOR,
DATE; APRIL 5, 2007
EDITORAL: JOHN MORRISS
Farmers have spoken. The challenges will continue, including the legal one of whether the Canadian Wheat Board's authority over barley can be changed without legislation. Regardless of your view on the outcome, it's impossible to argue that things should be done outside the law.
But the reality remains - those who argued that a "dual market" is impossible for barley have failed. Most farmers who voted for a dual system must surely have known they were risking an end to the CWB's role in marketing barley. It's hard to imagine that almost half the farmers who voted hadn't heard that message. If you combine them with the 13.8 per cent who voted for a complete end to the board's involvement, you have 62.2 per cent of farmers who do not believe that a monopoly provides any benefit.
That may be hard to understand. Relatively speaking, malting barley is already one of the most profitable crops on the Prairies. The current PRO for Manitoba of $3.23 per bushel times last year's StatsCan yield of 63 bushels yields a return of $203 per acre, compared to MAFRI's estimated cash costs of $112.75.
A decent price for barley will not be much of an imposition for beer drinkers. You can make 333 bottles of beer out of a bushel of barley, which makes the farmer's share about ninetenths of a cent. A change to the CWB's authority will not create more beer drinkers, and therefore markets for malting barley, which is the main economic issue at stake. Under the current system, anyone who wants to buy Prairie malting barley has to buy it from the CWB, which has used its monopoly power to extract hefty premiums over feed. But the board doesn't actually handle that barley - that's done by the elevator companies. When the monopoly ends, those companies cease to become the board's agents, and become competitors - with the board, with each other and with farmers. This will mean the end of the system under which all barley selected for malting must be purchased directly from farmers. Grain elevator companies who happen to end up with some nice barley purchased as feed will be able to sell it for malting. Since there's no official grade for malting barley, farmers can't get a third-party ruling from the grain commission and insist on being paid for it, as they can for regular grades.
It's hard to imagine that competition for markets won't drive the price down, but most farmers don't seem to see it that way. They believe that the companies will compete with each other to drive the price up. We'll never know for sure. Through the board system we know exactly how much malting barley was sold, what it sold for, and its premium over feed. Such exact statistics will cease to become available when the board monopoly ends, just as they ceased for selected oats when the board had the monopoly over milling and export sales. Over its eight years before the CWB lost its jurisdiction for oats, the selected pool delivered an average premium of $46 over feed. What's the premium for milling oats now? That's uncertain, but few seem to have complained.
So it's time to move on. Single-desk supporters need to quit fighting this battle, at least for barley. Similarly, those who have argued for a "dual market" should quit claiming the board can stay in the business. The only way that can happen is if the initial payment is so high that farmers will choose it over a cash price. Neither the finance department or the board's grain company competitors will stand for that, and a pool account loss would trigger a WTO challenge. If the board offers a cash option, then the grain companies, whose services will have to be contracted by the board and farmers, will make sure that it's more attractive to do business with them instead. Either way, the board looks bad, and the dual market forces will use that as evidence in their battle to remove the monopoly on wheat.
The only question now is when to do this. For legal and logistical reasons, August 1 may be too soon. Announce it will be done, introduce the legislation and then plan for an orderly transition for August 2008. That way everyone, including customers (who have so far been left out of this debate) can be certain about what will happen and plan accordingly.
It's time to quit arguing about this and just get on with business. If farmers don't think a sales monopoly is serving their interests, so be it.
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