Open wheat market appears to be working fine

Six months into the crop year and the sky hasn’t fallen. In fact, the transition to marketing freedom has been amazingly smooth. The howls of protest have been reduced to murmurs.


Observers would be quick to implicate the end of the CWB monopoly if this was a year of low international wheat prices and/or the various bottlenecks that can often affect Canadian grain transportation. By happenstance, the federal government picked a good year to make the change. 


Wheat prices have been up and down but remain historically strong. Grain movement has been good, and producers have had the opportunity to sell much or all of their grain.


Producers who have marketed outside of CWB’s voluntary pools have done so in much the same manner as they sell their canola.


And with six months of price information available, it has become difficult to accept that the former CWB monopoly consistently provided a price premium.


Various academics who studied the issue and who had access to internal CWB sales statistics always maintained that farmers earned more with the single desk. Most CWB directors had the same view.


Outside observers would question that analysis, pointing to wheat and durum prices that seemed much higher south of the border.


“Apples and oranges,” single desk supporters would proclaim. 


“You can’t compare a spot price in the U.S. with a pooled price through the CWB here in Canada. Besides, those prices you see posted in the U.S. may only be for a load or two or they may not be real at all.”


Logic dictated that Canadian pooled prices would sometimes be lower than American spot prices. After all, a pooled price is a weighted average. By extension, however, there should also have been times when the pooled price was superior. 


The latter seemed to rarely if ever happen. Quoted prices in the United States seemed to almost always be higher than CWB’s Pool Return Outlooks. Often there was a huge price difference, stoking the fire to end the CWB monopoly.


Well, maybe those wheat and durum prices in the northern tier states just aren’t a fair comparison. After all, according to economic theory, a competent single desk marketer should be able to extract a premium from the marketplace.


Serious doubt is now being cast on either the economic theory or the marketing competence. In recent months, the prices quoted for durum and the various grades and classes of wheat in the northern U.S. have largely been on par with the prices Canadian growers can receive on this side of the border. 


No need to take your wheat to the U.S. because American prices have magically been extended to this side of the 49th parallel. The U.S. prices are real and so are ours.


As in the U.S., Canadian prices vary significantly from one elevator point to the next depending on freight and handling costs and how eager the point is to attract deliveries.


But if you follow information sources that list prices paid at elevators in Western Canada as well as in North Dakota and Montana, you see little difference. 


Canadian prices are not only competitive, they are occasionally higher.


Were the supposed single-desk premiums mostly fiction and wishful thinking? There may never be a definitive answer in the academic world, but among most farmers, price parity with the U.S. is a sign that the open market works just fine.


Kevin Hursh is an agricultural journalist, consultant and farmer. He can be reached by e-mail at kevin@hursh[email protected]

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