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government backing, my read on it

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    government backing, my read on it

    Government Backing Solidifies Future for
    New CWB
    In the guts of Bill C-18 we find
    significant support from the federal
    government in the form of government-
    backed borrowings and initial payments
    for a period of up to five years. Many
    people were surprised to see such a deep
    and long-term commitment from Ottawa to
    help the CWB transition into a
    commercial organization. Likely,
    policymakers were responding to concerns
    raised last summer and fall that the
    timeline of August 1st, 2012 was too
    tight for all of the old-crop pool
    close-out issues to be dealt with while
    simultaneously determining the path to
    create a successful new organization.

    At the same time, the legislation allows
    all buyers to contract grain directly
    from farmers (for delivery August 1st,
    2012 forward) as soon as the Bill is
    passed and receives royal assent. This
    is expected to happen in December 2011.

    So, in the not-too-distant future, we’re
    going to be facing new pricing
    opportunities for wheat, durum and
    barley from a wide variety of buyers.
    The contracts and their terms, the
    schedule and plan for taking delivery,
    and of course the prices, will all be
    new information for Prairie grain
    producers to interpret and make
    decisions about.

    It’s too soon to say exactly what
    growers will be offered, but we do
    expect the offers to come from new and
    traditional buyers, including a
    voluntary CWB, who is also going to be
    bidding for non-Board crops. They got a
    great big carrot in the form of
    government financing of their grain
    inventories and working capital, to
    bring the grain handling companies to
    the table to negotiate fair handling
    agreements.

    Shortly after getting feedback that
    their timeline for change was pretty
    tight, Ottawa heard concerns about the
    amount of operating capital the private
    grain trade would have to come up with.
    $1.5 billion was one credible
    consultant’s estimate of the amount of
    new financing the industry would need to
    access in order to handle farmers’ Board
    grains. While it doesn’t make this
    number go away, continued backing of
    initial payments by Ottawa for the CWB
    does reduce the financing burden of the
    elevators by whatever portion of the
    crop that the new CWB does handle.

    Giving the trade this incentive to
    handle the new CWB’s grain further helps
    the organization’s chances of securing
    reasonable rates from the line companies
    for originating and trans-shipping grain
    to port on their behalf. This is
    critical to the CWB being able to earn
    farmers’ business through competitive
    country pricing.

    It’s long been feared that the private
    trade would shut a voluntary Board out
    of the marketplace, but since Bill C-18
    was tabled every one of the big 3 grain
    handlers has publicly stated their
    willingness to work together. Looking
    deeper into the initial financing terms
    the new CWB has been given, and the
    positive implications for its handling
    partners, these are credible claims.

    www.farmlinksolutions.ca

    #2
    BJL, a couple of points. First, the old commissioners of the CWB always touted the 3 pillars of the CWB as the single desk, pooling, and the government guarntee. The government guarantee on borrowings contributed a surprising amount of money to farmers returns. That should continue to be the case if the board gets some grain to market. That will be their challenge.

    Without the single desk they have to offer some price signal. If pooling, and that's all they should offer, by being the pooling provider, they need the PRO. but it needs to be more dynamic. Shorter pools would help make it so.

    The board should leave the FPC alone. It is a poor imitation of the open market. When proposed, the FPC was relief from compulsory pooling. It provided a cash alternative tool for the farmers that wanted or needed it. It's secondary not entirely hidden purpose was to show farmers that dual marketing could work. Until the FPC the board said pooling could only work by itself with no detractions, cherry picks, etc. The FPCs also was also to help farmers appreciate what cash pricing on wheat could be like, and want more.

    Lastly, as far as receiving reasonable rates from the line companies for handling grain, dream on. If the line companies aren't merchandising as well as handling, the rates will be at or close to maximum tariffs. if the shipments are domestic or North American, the rail and elevation may come down to reflect the effect of truck competition but that would be it.

    Comment


      #3
      Agree except the following.

      "If the line companies aren't merchandising as well as handling, the rates will be at or close to maximum tariffs."

      When you look at a cash ticket from a CWB delivery, what would call elevation deductions today? What level of competition is there when they are established? Yes there can be trucking premiums or the CWB ability to extract benefit via tendering (sometimes but deposited in the overall pooling system) but generally the elevation side provides good margins. Storage/impact on high throughput efficiencies might result in a different conversation from a grain company.

      Comment


        #4
        I never considered the effects of tendering. It never worked out the way I would have liked it so I tend to ignore it. But certainly if the board coordinates shipments correctly and an elevator company can load a good number of cars, the incentive for loading good multiples should be passed on for CWB grains.

        Comment


          #5
          To the original post, what would it mean for the CWB if they could retain the Japanese Food Agency business/long term agreements, access to government guarantees to finance these sales and effective farmer contracts that could pull 75,000 to 100,000 tonne of 1CWRS 13 percent protein up the driveway of an grain company every month?

          Comment


            #6
            What did you think of my idea Brenda?

            Question-these big spooky grain companies make
            what % of their bottom line on buying and selling?

            And what % of their bottom line is made on handling?

            Comment


              #7
              Should Govt funds back the new farmer-owned
              company sales, but not back Cargill's sales?

              Why should Govt back, say WIT sales, but not
              Viterras? Parsi

              Comment


                #8
                Charliep, are Govt backed guarantees part of the
                real world for canola ? Oats? Flax?

                Comment


                  #9
                  The answer would be no. Government guarantees only apply to CWB grains.

                  Comment


                    #10
                    I thought I'd missed some legislatio passed in the
                    last two days.
                    Surely the new CWB will be governed by the
                    same rules the Free Market expects from all
                    other free market players. Pars

                    Comment


                      #11
                      #1 - Pars, are you having a runaway with that Hutterite
                      wine?
                      #2 - It would seem to me that Govt loan guarantees
                      are much more significant to the producers bottom
                      line than to the new (however it turns out) CWB. I
                      would accept that as a win-win.

                      Comment


                        #12
                        I have trouble with whine.

                        What does #2 mean to you?

                        Comment


                          #13
                          Pars, #2 means to me that you can forward sales
                          into markets that might not otherwise be available
                          to you. To me, a buck in the pocket is more
                          freedom than a pile stored and unsold on the
                          ground. Oh btw, I'm not whining, just a natural born
                          opportunist. Sooo, when I think about it, in the
                          brave new world will organic product still have a
                          niche or will price trump product?
                          You're a dreamer and quit the boob talk unless you
                          really have something to brag about!
                          And to prove I'm not politically correct - here's one
                          for you. I was watching the weather tonight and the
                          weather girl said that with this cold moist front
                          moving in tonight I'm expecting 8 inches. And I
                          thought - with a face like that 'dream on'.

                          Comment


                            #14
                            I was referring to my whining, not yours.

                            And well,I admit freewheat's comment begged a
                            segue into unusual territory that I should have
                            resisted; but I truly was curious.

                            As for the sustainability of organics, they'll
                            probably forge into farm-identified food, with
                            growthy demand. A premium IP market.

                            Comment


                              #15
                              Hey freewheat, if you put on some extra pounds
                              maybey you will grow your own?

                              Comment

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