CWB "Killing Extra Strong!"

[TOM4CWB]

CWB killing Extra Strong Wheat.

The latest CWB 2001-02 Pro’s clearly indicate that the CWB does not want farmers to grow CWES wheat any more.

For many years, up until the 1998-99 Crop year, the CWB paid the same for high grade Extra Strong Wheat as it did for #1CWRS 12.0 protein

In 97-98 the prices were the same;
In 98-99 the discount was $6.00/t;
In 99-00 the discount was $7.00/t;
In 00-01 the latest PRO $21.00/t discount;
In 01-02 the latest PRO $28.00/t discount.

It is clear the CWB does not want to be bothered marketing this high quality specialty wheat.

Instead of working like Ontario with specialty contracting, the CWB is obviously after the CPS crystal wheat to market to hard red winter lower end customers(at discount prices), and CWRS for everyone else.

This is easy, simple, and profitable for the CWB.

What about for us “designated area” farmers?

Ontario growers go after high-yielding genetics that can be marketed to local mills. Seed companies simply screen for varieties that will make farmers the most money. They end with high-yielding varieties that meet basic milling requirements. These varieties may not measure up to typical CWRS standards, but they are optimal from an all-round economic perspective.(Wheat Oats and Barley, Feb 01, Page 27)

The rest of the world worries about all-round economics for their farmers.

The CWB, on the other hand, boxes us, whether we like it or not, into growing wheat that no one else would, should or could, given the all-round economic circumstances.

Is this fair for our farms?

This is another example of Single desk monopoly efficiencies?

How do I convince my sons to farm when they will have a rope around their necks like I have?

I have worked for years on growing high protein CWES wheat, and building seed stocks so that this wheat would be available to other farmers.

Obviously there is nothing wrong with this wheat when CWB buy-backs for high quality CWES are higher than for #1CWRS 13.5.

I just felt a sharp jerk on my neck of someone pulling the rope!

[charliep]

I don't share your conspiracy theory Tom but I do think it is important for the CWB to communicate with prairie farms with about customer needs and how our classes/varieties of wheat fit. This has to be over and above signals from prices/forecast pool returns.

My signal (at least based on prices) is that extra strong wheat is less in favor with customers than it has been in the past. To put extra strong wheat in perspective, it characturistic that gives value is gluten strenghth. It gives value to customers as a blending wheat with other classes/lower quality wheat to improve their flour quality. It has also been shown to improve shelf life/time that products can be stored in a freezer of frozen bread. Genlea is the cadilac of this class in terms of meeting customer needs with Blue Sky not far back (hopefully I haven't got the varieties mixed up on the last one). Wild cat and Laser are extra strongs but less desireable from the customers standpoint in terms of their characturistics.

US has been the main market for extra strong but they also have/have been working on wheats with similar characturistics (high gluten strength). I am a ways from my CWB days but this is a wheat that they were trying to promote in offshore both as a blending wheat and for frozen dough. These programs I would interpret have not been as successfull as hoped.

One of my job areas is to help farm managers get to know the needs of their customer and to work towards satisfying. Some of these changes can be really simple/cheap just in terms of variety selection. We also need to work on ways that measure the value to customer of these varieties and pass this information to farm managers in the form of higher prices.

How should the CWB/grain companies get these signals to the farm community (outside of the obvious one in terms of price)? Are there things that someone like my self in government or the private industry should be providing to help managers understand customer needs better?

[parsley]

charliep:

You're scheme seems to be to have /or keep a messenger/interpreter between the farm manager and the customer. You say it clearly. "... help farm managers ...know the needs of their customer ... measure the value to customer ...pass this information to farm managers..... How should the CWB/grain companies get these signals to the farm community... "

The question I would have to ask of this scheme is whatever happened to exclusively customer-buyer relationships? With identity preserved becoming mainstream, it becomes necessary to rethink the "you-need-an-intervenor paradymn. Rethinking by ALL the present players.
This is why:
1. Good managers insist on asking the customer directly what their customer wants, not relying upon screened,sometimes inferior, second-hand information.
2. Good farm managers work diligently towards getting rid of barriers between themselves and their customers. Service industries could provide service for fee when asked.

When #1 and #2 are executed, there can be a monetary saving for both the buyer and the seller. There is a possibility for a closer bond between the buyer and the seller. There can be a saving for the taxpayer. And the streamlined process benefits the consumer.
From a business point of view, this is a practical process.
Parsley

[charliep]

I agree with 100 % of what you said. These are questions I struggle with and look for advice.

For the most part (your world is different), we still live in a world that is commodity based - lots produced/sold and price is the major factor in determining who gets the business.

The questions I struggle with in a bulk commodity world:

1) How does the agricultural industry get information about customer needs to the farm level so it can be used in decision making?

2) When farm managers make management decisions, do they include an element of customer needs in parameters? This could be anything from growing varieties that have better fits with their target market (eg. variety specific two row feed barley versus just barley) versus just barley to making sure you have thought about who you are going to sell to when growing a new crop versus just growing and hoping.

3) When we grow a product like extra strong wheat that provides value to the customer, how can we make sure that this value is reflected in price with emphasis on getting the signal down to ther person who make the most important contribution - the farmer who decided to grow the crop?

4) A grain system that is able to segregate high quality/special needs crops and deliver when called for by customer?

A lot of theory I know but something we have to work with as an industry. Rather than commenting on things today, I try to picture how things might be.

Bringing it back to the topic, how should we handle the marketing of a crop like extra strong wheat? Is extra strong wheat a bulk commodity that has to be sold at the market or can it be treated as a niche market?

[charliep]

I read over what you and then my comments to find that I had missed your point Parsley. My mind was on bulk commodities. What is causing me frustration is can we take lessons from farm managers like yourself (with emphasis on the points you made) who are actively seeking niche markets/opportunities closer to the consumer (similar to your other question in the discussion web you started) and apply them to the larger commodity based markets that are harder to segregate/differentiate (commodity markets). Can we take some of those lessons and help farm managers who are more producers (I grow the crop/I'm not comfortable marketing it) be more consumer alert?

[TOM4CWB]

Charlie,

I would beleive that this would be a valid CWB signal, IF THE MARKET WAS INDICATING WHAT THE CWB IS SAYING.

I checked again today, and a #1CWRS 13.5 pro and #1CWES 12.5 pro are about the same at $197.00/t basis Vancouver BC.

Now this is the problem.

I have hauled my CWES to the US and it grades a #1 Dark Northern, no problem.

The CWB, like the eastern Canadian system must sell CWES on CWRS basis if simular quality is provided.

In 1996 the Canadian Government recinded the CEES grading tables, when kernal visual distinguishability requirements were dropped. All extra strong in eastern Canada, is graded the same as in the US, all under the hard red spring wheat grading tables.

And why not? Extra Strong is in many milling conditions internationally equal to CWRS. The CWB says CWRS processes faster, but most customers are used to US wheat anyway. CWES is essentially the same as US wheat.

I Beleive this is why the CWB is killing Extra Strong wheat like Laser and Wildcat.

They don't want products that directly compete with US quality, because then it is obvious big time when the CWB messes up. This would never do!

How do you explain the CWRS CWES buy-back being the same, if my CWES is worth according to the CWB, about $35.00/t less?

[charliep]

How long ago did I leave the CWB? It is not my place to defend their current policies one way or the other. I would highlight that CWES is sold in other markets than the US and the total payments for this class reflect this. The buy back reflects the price the CWB can get in the US.

As you can tell, I get excited about CWES as a unique trait wheat that provides our customer value. A note of interest is that you are just dumping it into a US elevator where all its superior quality traits are lost - with recognition that you are talking wild cat and laser. I feel like the rat in the maze that people have talked about in previous threads but is a superior wheat that meets customers needs a commodity only that has to be sold at the market (I am separating out the pricing issues you have with the CWB Tom) or is it a value based product that can be segregated?

[TOM4CWB]

Charlie,

The real point is that if my CWES is blended into the #1 Dark Northern US wheat supply, and consumed as part of US supplies that total 60 million meteric tonnes, then how is this hurting the CWB?

The CWB still has its own specially graded Canadian products, and this CWES is not comming back out of the woodwork to bite the CWB, it can't, its blended out and gone.

This in return should leave the pooling account less diluted from having to dump CWES at bargin basement prices!

The main point is however, that the CWB CGC systems are failing us. We cannot get value for this CWES wheat, when just a few miles away another marketing system can.

Shouldn't this tell us something?

[TOM4CWB]

Tom4CWB, you've identifed one of the challenges with CWES. The US market for CWES has been declining to the point where it represents about 10% of the total amount of CWES that farmers in Canada are growing annually. The US customers, however, continue to recognize the value to them of the strong gluten properties, and values are pretty competitive with CWRS with mid protein.

The challenge is that many of the customers for the remaining 90% of the pool aren't as keenly interested in the strong gluten properties. Consequently, they aren't prepared to pay comparable values.

When you look at the Producer Direct Sales value into the US, you're seeing values from the market that is close to the top value market for that class of wheat.

As the PRO takes into account all the sales to all countries over the marketing period, the CWB should rightly indicate the spreads that exist for the overall market, not just the nearest premium market.

You indicate that the US elevator would buy your CWES at DNS values, and blend it in. As the US system has to check quality through qualitative testing, the elevator manager can get away with blending it off. CWES does have different properties though, and as a marketer trying to emphasize quality, consistency and honesty, it's not a practise the CWB should engage in.

A last note - Kernel Vishual Distinguishability (registration guidelines geared to kernel shape, color, etc.) has been a very inexpensive method of quality control for Canada. That said, the CWB and CGC and other groups are checking out alternatives to KVD as methods to maintain quality contorl. There is a discussion paper on the CWB website under publications (www.cwb.ca/publications) you might want to check out.

Tom

[TOM4CWB]

Tom,

Thanks for your candid remarks, however isn't most of the CWES sold at discount prices with CPS and 3red CWRS anyway?

I understand this is the "Canada Western Wheat Class" and is the bargin basement sales class. Could you please tell me how much CWES is sold into this optional grade class?

[TOM4CWB]

THalpenny,

You have stated that only 10% of CWES gets a premium price in the premium price US market.

Now we go to cherry picking.

You say that if I am given a no-cost export license I will gain an unfair advantage, and steal this special premium market away from the CWB that no-one else can get to.

My question is then this:

If there is a special premium market that is worth significantly more than ordinary wheat, then why are growers along the US border on the US side picking up this market and taking it away from the CWB?

We freely export the high quality genetics that allow US wheat growers access to grow our special products, and even give no-cost export licenses for the seed growers in the "designated area" who could supply this seed market!

Now please tell me how the CWB has a monopoly, and how I am any different than a US grower in the capability of disrupting your program!

I am sure if there was extra money to be made the US grain companies and growers would have picked up and filled this demand, are you just accusing them of stupidity?

[TOM4CWB]

I'm not sure what your point is, Tom. On one hand you say you can get DNS values for CWES in the US. Then you acknowledge that most of the markets for CWES other than the US aren't interested in the strong gluten qualities of this class of wheat. Then you indicate the problem rests with US producers who are producing Cdn varieties?

Tom

[TOM4CWB]

thalpenny,

I remember 5 years ago selling CWES to Agricore(AWP then) and getting special authorization and early delivery calls for our CWES wheat.

This CWES wheat was loaded and directly sent to the USA.

WE had High Protein CWES, and AWP got a good profitable sale into the US, because this wheat was worth par with Dark northern spring, which is what it is worth today.

For equal quality Dark Northern, and CWES, with equal protein, they have the same value, because they are essentially the same thing!

But the CWB in world markets sells this high quality at discount prices, because it is different. Of course people will take a Rolls Royce at a Lada price!

The point of the US producers is that if CWES was worth more than Dark Northern Spring Wheat, they would grow it! Obviously in the US market it IS NOT WORTH MORE.

If the CWB would stop giving the protein away, and admit if a premium in the US is there, it is not the "single desk" that creates this value, but the inherent intrinsic value of the specific lot of wheat, then we could get along with our lives and start fixing our outdated system.

The way we are headed, the CWB wants to turn CWES and CPS into CWRS and have only one product to sell.

I know this would be easy for the CWB, but do you really think this will do anything but lose us mareket share and make wheat unprofitable to grow?

[TOM4CWB]

To Tom Halpenny, and the CWB.

I have had a long standing problem with the CWB's Glenlea preference over Wildcat, as the CWB and Conagra claim that Glenlea has higher gluten strength, therefore Wildcat is not good enough quality to be used in the dough specialty flour market in the US.

If this is in fact the case, then Wildcat should NOT be charged the high buy-back charge, because it does not meet the quality standards needed for the US market!

How can I cherry pick a market that I cannot supply?

Why is the CWB doing everything possible to kill extra strong, rather than allowing innovation and market forces to be the judge and jury to whether or not we should be growing this specialty wheat?