CWB MARKETING

[JKM]

Julie Toma; I have noticed that we hear very little from you on this thread. Being you are our resident expert on marketing, policy and planning can you tell us your thoughts on CWB verse open market marketing or a dual marketing policy. Also does the Alberta Government have any plan to free up domestic and exporting marketing for Alberta farmers. We have a family farm with two sons involved and I think the Alta Gov. could help grain farms in particular by pressing the CWB for a dual market. It would help wheat and select barley growers access the export market for different varities and qualities of wheat and barley. I believe it would also open up domestic value added enterprises. My reason for my last comment is that we pay $42.00 and upwards to $60 some dollars on the prairies in Western Canada for freight and handling of board grains. I think this policy deters value added end users in Western Canada because inaffect it charges them double for freight and handling. The farmer could obtain a better price by delivery directly to the end user and avoiding the CWB double charge. The pooling account is actually a subsidy to inefficient farmers. Thanks for any comments.

[cowman]

I have a friend who works for the dept. of Ag in Alberta. Just last week the minister was in Winnipeg, at a meeting with the CWB board. She floated the idea of a "trial dual market" for one district(Chatenays'). It got a resounding NO! So don't count on any changes soon.

[Steve]

Hi! Karnel



The CWB seems to be a sore spot for young farmers and I wonder what percent of the farmers feel that way. It would be worth the effort to see if we could in some way convince the CWB to shut down for two years and give these farmers a chance to prove that they can market the wheat and barley at a better price. That would mean no Government help.

These are some of the things that one should realize before making that decision:
1No more interest free cash advances.
2No bale out if you sell on credit and don’t receive your money.
3No more assurance that everyone will be able to sell some wheat when there is a big world surplus, the early bird will get the worm.
4It will be a challenge to export wheat at a lower cost to the producer than the CWB is at the present time and we surely need to export.
5The most important factor is wheat is the easiest crop to grow and the hardest to market.
6Our local grain companies use CWB money to pay producers for wheat deliveries.

Maybe we shouldn’t bite the hand that feeds us because we need stable marketing for many years to come. Also did you actually calculate the net profit deference if you would sell on the open market or just assuming you would do better? I don’t mean just for one year.

[Steve]

Steve: You must be a lazy marketing farmer depending on the CWB to get you a price and determine your freight and handling charges and removing any incentives for the agri-industry to create value added processing to our bulk grain. This could reduce dependence on the export market. 1. Cash advances are Gov. loans backed by the CWB deliverys, not CWB generosity. 2. As a farmer I will not be in the business of extenting credit to anyone. 3.If there is a susplus in wheat grow something else. 4.Grain companies are selling oilseeds and feed grain now on the export market and I must say at a smaller basis level per tonne than the CWB is moving wheat at now. 6. Grain Companies will find their own money for purchases believe me, without the CWB. Maybe we should bite the hand that leashes us to one buyer. I can't calulate if the CWB is a bad or a good profit without a dual market to compare it with. You might think we need a huge export market to move bulk grain off the farm. May I point out the livestock feeding industry that has developed in Western Canada since feed barley was removed from the grips of the CWB and requires no buy back. Maybe if wheat and select barley had an open domestic market, just maybe we wouldn't have to depend on bulk exports of our grain so much. Just a thought, I do not assume anything to be right or wrong but would appreciate the freedom to find out. Thanks for your comments Steve, looking forward to more. The Kernel.

[Steve]

Kernel: I don’t know if I was really a lazy farmer because at one time I grain farmed 700 acres and marketed my wheat, barley and canola. I also at the same time had a surveying company, which I owned and managed.
Yes I sold my wheat and some barley to the CWB and was not always happy, but the way I look at it you can’t win them all.
I sold the canola to UGG or Alberta Wheat Pool if they offered the right price. In some cases I priced the canola on some future month that would give me a good return. I tried the 90 or 60 day unpriced canola and didn’t like it because the grain buyer seam to have the upper hand.
I also sold some canola and bought a rally master for $12 or$13.00/t that added more of a gamble to marketing that I needed. We all know that in some cases greed over rides commonsense and we lose.
I retired two years ago and golfing is shut down so I am on the net passing some time away and my intentions are not to offend anybody just to voice some opinions may they be wrong or right.

There was a lot of things I learned by operating two unrelated businesses, one has to realize that it doesn’t matter how hard you try there are too many variables to obtain the maximum profit all the time.
Lets use canola [not on the CWB] did you sell all of it at the highest price for the year? That is next to impossible to do because of all the variables so we can assume that anything on the commodity or stock market is a gamble. Now add to that weather, carry over surplus grain, seeded acres and untrue rumors that could come into pay because large traders want to move the market in their favor.
The value added issue; you still market all that is produced and with Canada’s small population we need to export.
A lot of our large customers want wheat not flour and barley not beer and I don’t think they would shut down their mills and buy our flour. I could see it to be a good thing if our population was 100,000,000 plus.
I also realized you could buy equipment, but had to depend on people to run it and that means if you run a business you have to hire and trust people to make your business a success. [ farming is a business] These people could be your partners or employees the same rule applies and maybe we could consider the CWB as a partner and also say nothing or no one is perfect.
I know the CWB needs changes and I believe will do so if we take the time to improve it and not destroy. We seem to see all the wrongs that some do and never stop to look in our own back yard.
No I don’t think the CWB can operate on a dual marketing system because we all know that you need large volumes of product to keep per unit cost down. Some are already saying the CWB spends too much money to market wheat and barley, because they compare the cost to bases on the open market. Bases in some cases are not worth the paper they are written on that is just used to attract a seller and the real operating cost is hidden in the total price. Most grain companies are not allowed to gamble and have to charge for their services to stay in business. The canola is in most cases sold on the future market before they offer you a price. [More to come]
I know the CWB just administrates Government money paid to the farmer, but also know what it takes to squeeze a few disaster dollars directly from the Government and the cash advance would be in the same boat.
You said if there is a surplus of wheat than don’t grow it, but we could apply the same theory, if you don’t like the CWB don’t grow wheat or barley. I think we are both wrong in this approach.
I didn’t mean to extend credit to the buyer for a long period, but you do to some extent when the grain buyer issues you a cheque for your grain delivery and it could be a rubber one. I know it happens in the grain and surveying business. I know your answer, [they are bonded.] but too often they extend it past their limit. With the food added theory there will be more places to sell grain, but the rubber cheques could complement that.
We have a free trade agreement with the USA but we all know how that works if they don’t need it they cry wolf and put on a tariff to stop dumping cheap food.

More to come
Regard Steve.

[chaffmeister]

Let me start this comment by saying I'm not anti- or pro-CWB; as a non-farmer, I am pro-whatever-works. If that means the CWB, then so be it - end of argument. Having said that, I believe the greatest failing of the CWB is that it has failed to prove its worth.

Regarding Steve's ideas of what it would mean to have no CWB, and notwithstanding The Kernel's response, here's mine:

"1 No more interest free cash advances."

Shutting down the CWB would not shut down programs under AMPA (Agricultural Marketing Programs Act) such as the Cash Advance Program. As the Kernel explained, the CWB simply administers the cash advances. Without a CWB, there would be another mechanism to administer these.

"2 No bale out if you sell on credit and don’t receive your money."

Appears that what you meant by this is selling wheat to grain companies and having concern for the viability of their cheque. Your comment suggests that the CWB is there to bail you out if there was a problem with one of it's agents. Afraid that's just not the case. Yes, grain companies are bonded - so deposit that cheque within the 30 day limit. And that applies to both CWB and non-CWB grain.

"3 No more assurance that everyone will be able to sell some wheat when there is a big world surplus, the early bird will get the worm."

I'm not sure where this notion comes from, Steve. But it implies that when there is a big world surplus, farmers in areas where there is no central selling agency (say, in the US), are not able to sell their wheat. This just isn't so.

"4 It will be a challenge to export wheat at a lower cost to the producer than the CWB is at the present time and we surely need to export."

Steve, this is one of those mis-informed comments that the CWB has done nothing to counter or clarify.

The whole grain handling system in Western Canada has been developed over the years around the CWB and its cloak of regulations. Over the years, grain companies have earned healthy revenues from elevation, cleaning and storage of CWB grains. Add to that, revenues from blending, selling screenings, arbitrage and interest "plays" - all on CWB grains and all with minimal risk. Competition for CWB grains was muted by ridiculous regulations that kept companies from being able to increase their market share - or lose it, either. Why beat each other up when you can't ship any more grain than you did before?

The system is now in the process of changing - getting closer to a commercial system. The grain companies' responses to the new CWB tenders show just how much of the CWB revenues the grain companies are willing to cut in order to get more grain through their elevators. (And if you think it's different on non-CWB grains, just ask them how much they are making on handling canola these days.)

In addition, the CWB has it's own costs too. In 1999/2000, the CWB's costs amounted to $7.67 per tonne delivered by farmers. This is a cost above and beyond the cost of moving grain through the system.

The CWB will talk about it's own costs - it pretty well has to. It will also talk about the costs of physically handling and moving grain, however blaming it on the greed of the grain companies and railroads and the lack of competition, and not acknowledging that it was the regulations that supported the CWB system that created the inefficiencies.

What the CWB won't talk about is how much the grain companies (or more specifically, the Accredited Exporters, many of whom also operate elevators) are involved in actually making export sales. Let's just say that it's more than the CWB is willing to acknowledge.

So Steve, to get back to your comment that "It will be a challenge to export wheat at a lower cost to the producer than the CWB is at the present time", I firmly believe that the CWB "system" is in fact a high cost system - I have no doubt that without the CWB the costs of moving grain to export customers would be much less than they are today.

This puts even more importance on the question of what value does the CWB bring to the table - higher prices, market development, etc. I have no evidence to say what this value is or if it's enough to cover the higher costs (this is what I mean about the CWB not "proving" itself). If the CWB can find a way to prove itself, it should.

This also helps explain why the CWB couldn't survive a dual market. They say so and I agree.

"5 The most important factor is wheat is the easiest crop to grow and the hardest to market."

I'm not sure how difficult wheat is to market via an open market as opposed to through the CWB. It should be noted that in the global wheat trade, Canada (CWB) has lost market share over the past few years. We need to ask why. Steve, you may be right - wheat is hard to market. It just may also be that it is even harder when you do it through a government bureaucracy when most buyers are now private.

"6 Our local grain companies use CWB money to pay producers for wheat deliveries."

Grain companies use their own money or borrow from banks to pay producers for wheat deliveries. The CWB pays the grain companies only upon unload at terminals.

The CWB used to say that through it's monopoly powers it was able to capture market premiums. I don't hear them say that too much anymore. In fact, when you ask them, they will likely say that, with the exception of Japan, they need to be price competitive. It seems the CWB is now more apt to talk about the "benefits" of the CWB being price pooling, equity of delivery opportunity and that they are advocates for farmers. So, no apparent price gain, but still a cost.

Steve, you also commented about the workings of the non-CWB market and how this is a gamble because "everything on the commosity or stock market is a gamble". First, I don't agree with you and second, remember that the CWB is operating in those same commodity markets. If it's a gamble for you, it's a gamble for the CWB as well.

I've rambled on far too long. I hope what I have to add is useful.

Chaffmeister

[TOM4CWB]

Steve,

1. I can get advances on my non-CWB grains, and the CWB has nothing to do with it.

I have a neighbour who took out a CWB spring advance, guess what when a hail storm hit the CWB got his hail insurance payout, whereas I got paid and am allowed to pay my Canola advance back CASH before DEC 31st without penalty!!! Just check the fine print, CWB advances are the worst for tying you up, reducing marketing flexibility!!!

I have marketed wheat on the open market in the USA, and I did get paid for every bu. just like I have with my Canola, non-board feed barley, peas, etc.

The CWB could survive, I believe contary to chaffmeisters opinion, in a choice markting system.

These pooling operations are at work all around the world, and very sucessfully in yes, the USA.

Private Bean pools work well right here in sunny Alberta!!

Would the CWB have to change?

Of course they would, just like the Ontario Wheat Producer's Marketing Board, the CWB would truly be forced into serving our real needs, or else failing.

But aren't you and I required to be responsible and supply our customer's needs at the prices and under the conditions they require of us?

Is in not more satisfying being a farmer that meets these needs?

Wouldn't CWB staff be much fulfilled happier knowing they could actuaaally make it in the real world without the CWB Act sheild to protect them????

[TOM4CWB]

Thanks Chaffmeister and Tom. Maybe we can convince Steve to spearhead a CWB revolt in Western Canada but I think it will take a little more to wash his brain of CWB propanganda. I have hope. The Kernel.

[Steve]

Chaffmeiter: My initial six points were to start the conversation and didn’t carry any detailed explanation with them. I also started to comment on some of these to Kernel.

I thank both of you for responding to my comments
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Chaffmeiter; you seemed not to have read my reply to Kernel and also totally misinterpreted most of the things I did say. The CWB that you didn’t care about seem to come into every statement.
I know the CWB only administrates Government money to the farmers but it also guaranties that cheques issued for CWB grain are good, cashed now or deferred, but doesn’t cover the off board grains. I don’t know why you would think I said any different. At one time the grain companies issued cheques with the CWB name on them.

When there is a large surplus of grain worldwide countries like the USA or Europe subsidize exported grain sales. They also don’t like the CWB because we wouldn’t disclose the selling price to our steady customers, but also the USA doesn’t show their full deck of cards so we don’t know the extent of their subsidy.

Canada has the best uniform quality wheat in the world and that could partly but not exclusive be contributed to the CWB controls, which results to maintain steady customers.

There is no real competition in railways so it is hard to negotiate a fair freight rate to move grain to the coast. .

Yes you are right that in the past local grain companies depended on the CWB income to operate the country elevators.

Now look at the grain company performance trying to stay in business and looking for partners because they know they can’t manage alone.
Keep in mind that you can buy, sell and trade on the commodity market but you still have to deliver most of your grain to the local grain buyer to be graded, cleaned, stored and loaded on to trucks or railcars. They may give you a good bases contract but believe me there has to be some hidden cost for the company to stay in business.

Yes I know the grain commission controls all the grading for all grain exported.

I believe that the CWB people could do a better job of marketing if there was no Government politics involved, but if so we do not need the CWB. This should eliminate all the inefficient farmers and watch them big boys go for it.

Who do you think should be in charge and allocate the railway grain cars to the user?

Wrong or right I use to like the CWB selling my grain that took away some of the stress also gave me some time to golf and enjoy life. It doesn’t matter who helps you along the producing and marketing chain it will cost you money including your money or marketing adviser. As someone said “ you have to pay for good advice and don’t listen to coffee shop talk”. I know by experience that there is stress involved to market and try to get the best price for canola and in many cases you can’t achieve your goal. I know some say they do but it is the some person that goes to the casino and always wins.

As a farmer you will burn yourself out at an early age if you go at grain market the way some are suggesting to get the top dollar. Maybe you think your managing risk but the stress complements that.

Tom I liked some of your comments and thanks.

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