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Where to Sell Grain Post-Canadian Wheat Board?

31 October 2011

CANADA - The new Canadian Wheat Board is going to have a difficult time attracting the business of farmers. Let's put the passion and vitriol aside for a moment. Barring some surprise in the courts, a voluntary CWB will be in place at the start of the new crop year, writes Kevin Hursh in an opinion piece for Canada's Producer.com.

Whether you like the government's direction or you don't, we will soon be faced with the decision of whether to sell our wheat, durum and barley to one of many private players or whether to do business with the new and voluntary CWB.

It won't be a farmer-run CWB. The farmer-elected directors will be gone, leaving just five government appointees. This will be a government institution that has up to four years to submit a commercialization (privatization) plan to the government.

As soon as the legislation is passed, the private grain trade in competition with the new CWB can begin contracting wheat, durum and barley for delivery after Aug. 1, 2012.

To whom are you going to sell? According to the federal government, the voluntary CWB will offer "pooling options to farmers who wish to market in this manner."

Some commentators confuse price pooling and single desk selling. The purported benefit to the single desk is that a single seller should be able to extract a premium from the marketplace. Whether the CWB has truly accomplished that is a matter of hot debate.

Price pooling is a result of the marketing system, not part of any tangible advantage. Producers sell into a pool, not knowing what their final price will be. Their delivery opportunities are controlled and they have to wait a considerable length of time to get all their money.

Of course, the CWB has come up with many pricing options to allow farmers to lock in prices and get their money sooner. Hopefully those sorts of options will continue in the new CWB, but the underlying fundamental will still be price pooling.

When the act is passed and the farmer elected directors are terminated, expect the organization to be only a shadow of its previous self. Many of the current functions won't make sense in a competitive environment. And how many people do you employ when you don't have a clue how much grain you're going to attract?

Will CWB supporters rally behind the new CWB? Farmer control has been lost. The single desk has been lost. And the new entity is the creation of a government dedicated to marketing freedom.

Will market choice supporters do business with the new CWB? Theoretically, they should do business with whoever can offer the best price, but in reality the producers who have fought for market freedom would have to see a big benefit before marketing through a voluntary CWB.

The new entity will enjoy government guaranteed borrowing and initial payments, and assuming there is some continuity with the existing CWB, it should have strong marketing connections around the world.

The disadvantages include no grain handling facilities, internal turmoil as many employees are lost and all the uncertainty that comes from operating in an entirely different environment.

You know how it works when you sell your canola, field peas or lentils to a buyer. That's how it will work selling your wheat, durum or barley to the private trade.

Will a new CWB be able to demonstrate competitive prices and earn your business? It's doubtful at best. That leads to the next question. How do you commercialize a sinking ship?

TheCropSite News Desk



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