Canadian wheat buyers are expressing feelings that range from neglect and confusion to relief and anticipation in the wake of legislation intended to pave the way for an open market for wheat and barley.
Some say they have been left in the dark throughout the process.
“This has all been about farmers. I don’t think anyone has talked to customers, which is perhaps a little surprising given that more than three-quarters of Canadian wheat is exported,” said Jeffrey Smyth, president of Database Analysts Ltd.
Smyth is a Canadian-based consultant who has worked with Japanese food companies for more than 40 years. Japan is Canada’s second biggest export market for wheat.
His customers feel abandoned by a process that didn’t include input from foreign buyers and confused about how to proceed come Aug. 1, 2012 when Canada transitions to an open market.
Smyth said the way that the change has happened flies in the face of what is taught in Marketing 101.
“You usually start with what the customer wants and work your way back as to how to provide it. In this case we seem to be starting from the other end and just making an assumption that this is going to be fine with the customers,” he said.
There could be repercussions. When a buyer operates in a market characterized by “confusion and no information,” they tend to gravitate to alternative markets that offer certainty and familiarity.
“(Buyers) do have other options. There are other people in the world selling wheat,” said Smyth.
Gordon Harrison, president of the Canadian National Millers Association, represents a group that is the largest buyer of Canadian wheat.
His members like to manage supply and price risk by forward contracting their wheat for up to 12 months. They were concerned they wouldn’t be able to enter into such agreements for the 2012-13 crop year.
“We are pleased to see that (Bill) C-18 contains provisions in Part 1 that will allow producers and the rest of the supply chain to do this as soon as the bill receives royal assent. The remaining uncertainty is when that will occur,” said Harrison in an e-mail.
He was also pleased with the affirmation that the CWB will retain control over the marketing of the entire 2011 crop and stocks from prior harvests.
“Canadian millers and their customers in particular need this certainty and we are pleased to see that the interests of customers have been recognized in drafting (Bill) C-18 and (in) the minister’s transition plan.”
The United States is Canada’s top export market for wheat and durum. The North American Millers’ Association, whose members represent about 95 percent of U.S. milling capacity, is pleased the single desk is being eliminated.
“That has been NAMA’s position for more than 10 years,” said the association in an e-mail.
“We must have access to Canadian wheat, regardless of the seller. Currently there is only one seller but we look forward to the day when millers can buy from many sellers. More competition in a free market would be best.”
Smyth saw nothing in the legislation addressing the biggest concern for the Japanese food companies he represents; how Canada will continue to provide the best wheat in the world when an organization that had a lot to do with maintaining that quality will have a diminished role.
“The Japanese will pay up to 10 percent more for Canadian wheat than wheat that comes from anywhere else in the world because what you order is what you get when you order Canadian wheat,” said Smyth.
His customers want concrete evidence that they can count on sourcing the same consistent quality of wheat in a post-single desk environment that they received under the CWB monopoly.
David Anderson, parliamentary secretary for the CWB, addressed that concern during the parliamentary debate surrounding Bill C-18.
“It is farmers who grow the grain, not the Canadian Wheat Board. The quality will not change because of the changes we would make,” he said. “The Canadian Grain Commission would continue to provide its services, regardless of who is marketing the grain.”
But CWB chair Allen Oberg said quality will be a casualty of the move to an open market.
“Over time, we’ll move to an American-type system,” he said.
That will mean a shift in focus to quantity from quality.
“Everybody out there will just be interested in volumes and making sales.”
Oberg said the CWB played a crucial role in maintaining quality by providing customer feedback to the wheat industry, such as their concerns with the Grandin and Alsen wheat varieties.
“It was at the wheat board’s insistence that those varieties were pulled out of the system.”