Prairie wheat and grain in the eye of the storm?

All we can hear about, see on TV and – for many of us – think about right now is the damage being wrought by Sandy. (As I write this I’m also Skype-chatting with friends in Massachusetts and West Virginia who are dealing with the storm right now. The West Virginian has damage to her home’s roof, the basement floor is soaked and there’s more damage in the yard outside.)

It’s pretty freaky stuff that always reminds us how reliant we are on the weather not going haywire. Our civilization can collapse pretty quickly when hit with more wind and rain than we normally expect.

Here on the prairies we’re not struggling with a Frankenstorm in the real outdoorsy world, and in the grain marketing system we appear to be in an odd period of calm – very odd, considering the revolutionary changes that have just occurred to the Canadian Wheat Board system. I mean, these changes just happened and these are still the first three months of the new regime, yet we’re not hearing of any major problems.

Last week and Monday I called around a bunch of grain marketers and grain industry people to ask if there were any unforeseen or foreseen difficulties as the new system gets worked-in, and that’s something I’ve been doing throughout this time of change. It’s been joyfully surprising how few problems are appearing as the apparatus of the monopoly CWB is removed and the rest of the trade assumes the business. All the problems I’ve found have been small and implementational, and don’t seem to be the signs of any disastrous flaw in the new system. What I’ve heard most about is significant spreads in wheat and durum prices from elevator to elevator. That suggests the commercial grain trade is still evolving and still relying on making back-to-back purchases, matching commercial sales to elevator purchases then widening out the basis until another real-world sale is made. But that’ll probably fade as all the companies get comfortable with their ability to collect and market wheat and durum in a more regular fashion.

So this raises the point: is the present quietude the sign of a system that has adjusted terrifically well to radical change and has evolved and adapted already, or are we just in the eye of the storm? The political, legal and industry sturm and drang of last year’s caustic battle over ending the board monopoly could be over, or this could just be the intermission of a two-part saga.

Everyone will say at this point of my blather: “It’s too early to say.” And maybe it is. But so far signs are very good that we’ll be able to survive this transition without wrecking our system or ruining our reputation.

How do you know when you’re in the eye of the storm or if the storm has passed by completely? If it’s a real-world storm, we can go to the Weather Channel and see maps like the one above. But when you’re in the middle of it, it’s hard to tell.

Figuring it out inside the bowels of the grain trade at this moment is a tricky task.

(Top pic is an image on the Yahoo website from The Weather Channel. The second is from Wikimedia Commons and is from the book of The Wizard of Oz. The third is an Instragram pic of Sandy on its way by beizmendi)

 

About the author

Ed White — Ed White has specialized in markets coverage since 2001 and has achieved the Derivatives Market Specialist (DMS) designation with the Canadian Securities Institute.

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  • Jayson

    We could have found out if this massive change is good or not, if only the Conservatives didn’t shut down Ralph Goodale’s motion to study the impacts on farmers of shutting down the Canadian Wheat Board.

    Which really confirms that it isn’t going to be good for farmers and the even the Conservatives know it. Because if they actually thought it was going to be good for farmers, they would have jumped at the idea of getting themselves proven right and then they could sing from the mountain tops about how they helped farmers by killing the Canadian Wheat Board.

    I must say, farmers sure do love to talk politics, but they haven’t seem to got a clue how they work. They vote Conservative regardless of platform or person running. Heck, the candidate could show up at their farm, drive over their dog and into their new truck through their garden, hand their kids a bag of meth, compare their wife to their livestock and the farmer would still vote for them and then thank them for visiting on their way out the door as they walked off with the TV. Well, no party is going to try hard to make that voter happy because they know they got their votes anyway. Any other party isn’t even going to bother trying because the effort would be wasted and would be better served in a riding they may have a chance at. The old saying the West wants in, how about stop voting so blindly West and maybe the rest of the country won’t be blind to your existence?

  • Andy

    “It’s been joyfully surprising how few problems are appearing as the apparatus of the monopoly CWB is removed”

    I heard unreported crime is on the rise…

    But seriously, what mechanism is in place to collect and document these problems? Do farmers know who to complain to? Is anyone listening?