Can a voluntary CWB survive and thrive when it doesn’t have its own handling facilities? Survive, perhaps. Thriving will be a lot tougher.
After months of advising farmers not to miss the boat on the Oct. 31 deadline for its Harvest Pool, the CWB extended the sign-up deadline to Nov. 9. That doesn’t sound like a stampede of producers eager to commit.
There have been reports from farmers of elevator companies less than eager to facilitate the CWB option.
While some companies and specific managers may welcome CWB business, others probably view it as a complicating factor for their logistics. They may even feel it’s akin to promoting a competitor.
Consider this analogy. You see a used tractor sitting on a dealer’s lot. It’s what you’ve been looking for.
“What’s the price on that tractor?” you ask the salesperson.
“Oh, we’re selling that one on commission for a customer, but between you and me, you don’t want that tractor. The transmission is pretty weak and it’s going to need a lot of work. Maybe I have something else that will work for you.”
Perhaps the salesperson actually wants to protect you. Or maybe he wants to make more money by selling you a different tractor. Either way, that tractor isn’t being marketed well.
A similar situation probably exists at some elevator delivery points. A lot of farmers don’t walk into the elevator with the firm commitment to market 30 or 50 or 70 percent of their wheat or durum through the CWB.
They want to explore the options and compare prices.
Cash prices for wheat and durum are relatively strong. Based on the CWB’s Pool Return Outlook, there seems to be little or no monetary advantage from pooling versus the cash price. And with the cash price, you get all your money up front.
Pooling should assure an average price for the year. If you believe the CWB is a great marketer, maybe it will be an above average price. But it won’t be the top price and you’ll have to wait for a lot of your money.
On top of that, your delivery options may not be as straight forward as selling directly to the elevator company.
The federal government wants the voluntary CWB to work because it would dampen the criticism for ending the single desk.
All the elevator companies have handling agreements with the CWB, and they’re no doubt sensitive about being branded as unco-operative.
In theory, it should be great for producers to have a voluntary CWB as an option. In practice, it may not be worth the bother and expense.
Sure, the CWB has drastically pared down its workforce, but the cost for even 100 employees will add up unless a significant volume of grain is marketed.
The CWB has a lot of good people who have worked extremely hard under difficult circumstances to make the organization relevant in a brand new marketing regime.
However, at the end of the day, their success or failure will be based on the number of tonnes marketed.
If the volume ends up disappointing in the first year, will there be any way to make further inroads in year two? Or will producers become more comfortable with cash sales and gravitate away from the CWB pooling option?
History may show that the single desk supporters were correct. A dual market is great in theory but difficult in practice.