Cash and Pooled CWB prices

[TOM4CWB]

Charlie and Lee;

You folks have been really quiet on this topic, give us your expert opinions!

OWPMB offers both cash and pooled prices... edible bean marketers do, some only pooling, operating either in closed co-ops, with some offering both pooling with cash bids.

In our timothy seed market, we were offered pools and cash, it was our choice!

So exactly why is the CWB being so ornery on allowing cash prices?

[charliep]

Neither Lee or I work for the CWB but when the issues I hear them raise are concerns about ability to source in competition with open cash market and thinking that farmers would sell cash in a rising market/sell to the pricing pool in a declining one. They also have concerns about the trade selling at different prices (they would argue lower) than they do to the same market.

A question I will turn around and ask is whether farmers would using the pooling concept in an open market. Of the alternatives, edible beans (some other pulses for a couple of companies) and forage seed (I wasn't aware of Timothy) are the only success stories. People mostly want cash at delivery.

I sometimes compare an investment strategy to marketing grain. I have GIC investments, mutual funds and stocks in my portfolio. The reason I use mutual funds is I don't have time to follow the investment markets so I allocate funds to someone to make these decisions for me. I am also a real believer in averaging/taking timing out of my decisons. I would note that I have more than one choice.

Would farmers view potential pooling alternatives in the same way - seek someone (maybe the CWB) to help them market their crops?

[TOM4CWB]

Charlie;

The Western Hog Exchange is a really good example of what a reformed Single Desk seller can do... Here is what the Web Site says;

Established: Since December 6, 1996 Alberta has operated in an "Open Market" for all sales of hogs. The Western Hog Exchange (W.H.E.) was formed as a result of this change which is a departure from the way hogs were marketed in Alberta for the last 30 years under the old single desk selling system.

Purpose: The marketing of hogs for slaughter for those producers who choose to use the services of the W.H.E to enhance their marketing opportunities and to assist those producers to obtain the most benefit from all of our services.

Structure: There are currently seven elected hog producer directors who oversee the W.H.E. and provide policy to the staff of the W.H.E. All policies and short term and long term objectives by which the W.H.E. operates are established by the directors of the W.H.E. These policies are carried out by the General Manager of the W.H.E. who is responsible for hiring and the assignment of W.H.E. staff necessary to conduct day to day operations.

Now Charlie, we know that the hog market has many facets, many different priced markets, and is an expanding industry in western Canada.

Plus hogs are perishable... so pressure is greater for an efficient marketing system to work quickly and keep supplies within reasonable levels.

If hogs can do the transition from single desk... to marketing choice... in AB, SK, and MB... without a producer vote... just with a stroke of the Ag Minister's pen... Why not Wheat and Barley?

Price volatility is huge with hogs... therefore if hog producers can work with Marketing choice... how much more with wheat and Barley!

[Steve]

I hope that the CWB doesn’t become like the Western Hog Exchange, because the producers just became slaves for the big corporate meat packing plants.

Most of the producers are just supplying the labour and buildings and they don’t really have any price control for their hogs.

The price of hogs has gone up and down like a yoyo in the last few years to try and put the independent producers out of business, so then the packing plants can control all the slaves.

Grain has a different market and can be stored for years so I don’t think we can compare the CWB with the W.H.E or Ianben’s MMb.

Grain farmers better prepare for good marketing skills so they don’t become slaves to the large grain processing corporations.
Keep in mind most farmers need cash flow so you can’t store grain forever, and you better have a marketing plan before the seed goes into the ground.
Also be aware that the U.S.A can be a bully in the free trade agreements.

That is the way I see it.

[ianben]

Here in UK most grain buyers run at least two pools for most commodities.
Usually a short and long pool. short is usually harvest through to Dec and long Sept to June. Just put in X tonnes load at buyers demand,all sales averaged collect Jan or July and usually advance available at preferensal rate.

Not always easy to compare pool performance with competition as results are not published, but at least there is some there is some.

Buyer competition is good but is the CWB a buyer.

It was not the milk that was the problem but too many sellers including our reformed MMB.

Will a reformed CWB be a real competitor to Cargil etc?

[TOM4CWB]

Ianben;

The problem is that the CWB sells competeing with Cargill now!

All these co.s know the market as well or better in most cases... than the CWB knows it themselves.

If anyone thinks that Cargill, Conagra, ADM, Bunge, or Dreyfus just roll over and play dead when the CWB needs sales put on the books... I have some ocean front property in Alberta I can sell you!

THE U of S Benchmarking theory is false.

THE only way the CWB ever comes out on top... is that the benchmarking is done claiming that the CWB holds world wheat prices higher than they otherwise would be without the CWB.

And then the CWB turns a 180 and says that price discrimination (price discounting) provides a premium to monopoly farmers.

Now the CWB will not cash price... because then "designated area" wheat and barley producers could check this bluff (the CWB premium theory) out... Each and every day... if we had a cash CWB price... we could check CWB performance in the real world!

It certainly would appear this is the last thing the CWB wants to see... I WONDER WHY?!?!?!?!

[Steve]

Ianben

I see you keep asking the same question and never get a direct answer, but get a long story about why we don’t like the CWB and never a direct answer.

Your statement : Buyer competition is good, but is the CWB a buyer?

The CWB is a marketer of wheat and barley and not a buyer at the present time.

That is the problem now and if the CWB would do both then the producers would have a choice.

Regards Steve.

[parsley]

Steve,

The Canadian Wheat Board is a buyer of grain. They legally purchase the grain from farmers. The farmer loses legal ownership of his grain, although at times he retains possession of the grain.

The CWB sells the grain it has legally purchased from farmers.

These are the legal facts.

Parsley

[charliep]

Steve,

Help me understand the difference between a buyer and a marketer?

Charlie

[Steve]

Parsely

The CWB buying grain is a gray area for interpretation, because if the board paid an out right cash price for your grain it would be buying. The pooling system is just another way of saying the CWB markets the producer’s grains.

[parsley]

Steve,

Farmers lose legal ownership of their grain when they sell to any buye, and in thois case, it is the CWB. A transfer of ownership, in this case does not mean we gift our grain to the Board. We sell it to the Board. For money.

The Buyer(CWB) pays farmers the down payment (initial payment), and then they send the rest of the money to the farmer later on, in interim and final payments.

Sometimes, farmers legally purchase grain back from the Board (the buyback).

When you sell your grain to the CWB Steve, they do not even have to sell it back to you if they chose not to. They legally own the grain and have the right of refusal.

Don't confuse ownership with possession. They mean very different things.

Parsley

[Steve]

Charliep

Your question: what is the difference between a buyer and a marketer?

A buyer buys a product, which he can consume, resell for a profit or process it to a different form and consume it or sell for a profit or loss. So a buyer can become a seller (marketer) if the product is resold.

The buyer can be the consumer or end user and that would be the end of the chain.

Parsley

I know the Law that one can not sell something that the person or company does not legally own, but there are many options, sell on consignment, become a partner in marketing a product, pay a down payment and sign a contract to sell the product at a set price or the best marketable price, and the list could go on, but that I believe wasn’t Ianben’s question nor my answer to him.

I believe he wanted to know if the CWB was a buyer for end use or is the board just the middle man ( buy, steal or whatever from the producer) to sell( market) to the consumer or end user.

My answer was the CWB is basically set up to sell ( market ) the wheat and barley for the producer and is not the end user so it is really irrelevant at this point how the board obtains the grain.
We already have too many lawyers so there is no need to use our coffee shop lawyer skills to answer simple questions.

Regards Steve.

[charliep]

I did a dictionary search of marketer (didn't know if the word existed) and found the following.

One that sells goods or services in or to a market, especially one that markets a specified commodity: a major wine marketer.

Ownership is a key issue in this debate. Does the CWB ever take ownership of wheat/barley for export or domestic human food use or does it always belong to the farmer who produced it? One factor I always look for in ownership is risk. Who carries the price risk of CWB transactions?

[parsley]

Steve,
On the contrary, Steve. I think it is important for farmers to read their grain contracts, their insurance policies and read the legislation that governs them.

Ownership is crucial in selling and buying.

1. The Act states the CWB is legally obligated to buy the grain OFFERED to it:

32.(1) "The Corporation shall ....
(a) buy all wheat produced in the designated area and offered by a producer for sale and delivery to the
Corporation..."
CWB policy allows no other option than farmers to "offer" their grain to the CWB

2. The CWB cannot give away the grain they now own, according to Parliament. They cannot store it for forty years either. They have a legal obligation to sell this grain and this is described in the Act:

7.(1)
"The Corporation shall sell....grain acquired by it......for such prices as it considers reasonable."

Selling grain at cost is reasonable, Steve. Discounted selling is reasonable, Steve.

You say, Steve,

"My answer was the CWB is basically set up to sell ( market ) the wheat and barley for the producer...."

I disagree. my answer is that the CWB is a government agency set up to source all the grain it could get its hands on in order to service the Federal Governments financial obligations. ie..grain to war-torn England, current trade imbalances, foreign aid, etc.

And the points of view are contingent upon ownership, doesn't it?

Parsley

[Steve]

Charliep and Parsley

The CWB has to take legal ownership of the grain and with that comes the risk factor, before the board can resell it, and I am not disputing that part of the act or law.

Yes! Parsley one should read and understand any contract before you sign it.

A contract is a gentlemen’s agreement to carryout a transaction but is also backed up with a legislative law to protect each party from abusing each other.

The grain buyers and producers in most cases take it for granted that the contracts are just gentleman’s agreements. A few will try to take advantage of others on technicalities, but if you plan to say in business the gentlemen’s way is much easier.

I am not backing the CWB monopoly and I think we need change as I suggested on other threads, but Parsley there is no need to open the CWB can of worms ( Laws and acts and some that are out dated ) to answer a simple question.

The CWB is a Government agency and lets forget the early stages of the board because it has been revised in some areas, but unfortunately not enough to accommodate the marketing needs for today’s farmers.

The Government is saying that the CWB is a gentlemen’s agreement with the farmers to help the producers market their wheat and barley, but we all know that the Government bureaucracy is the stumbling block for that to happen, so we need change.

So lets go back to the original question and answer that started this debate.
I will try to answer the same question in a different way and again it falls in the gray interpretation area.

Yes the CWB at the present or if revised will always be just another grain marketing competitor in the marketplace worldwide.

Steve