There’s a revolution going on in grain marketing, and it’s far from done.
It’s up-ending century-old expectations and assumptions, which is offering both opportunities and risks to farmers.
As you can see in the stories I wrote for our AgFinance section this week on pages 56-57, long-held assumptions about corporate concentration and farmer power might no longer apply.
Or at least, they might no longer apply to a growing share of the grain being marketed in Western Canada, especially premium value crops that require a tight connection between growers, handlers, marketers and processors to extract that value.
To thrive in this new era, farmers are going to need a new attitude and new marketing skills. They’re going to have to get over suspicion and resentment and learn to trust buyers who prove worthy of their trust.
For more than 100 years, prairie farmers have harboured suspicions and resentment toward grain companies and traders, who farmers have seen as exploiting their individual weakness. That led to the creation of the prairie grain elevator co-operatives in the 1920s and the permanent establishment of the Canadian Wheat Board monopoly a couple of decades after that.
That was arguably justified in ages when farmers produced nothing but bulk commodities that could be immediately substituted by almost any other farmer’s crop. Buyers had more knowledge, they owned the facilities farmers had to use and they could almost hold farmers at ransom.
These days that approach doesn’t work too well. There are fewer buyers, but there are also far fewer farmers. The grain companies need better relationships with the farmers who remain because each substantial farmer now controls much more crop.
Farmers are also better informed. Price transparency has been a problem in the post-CWB era, but many more methods are evolving and farmers are much more market savvy than in the past.
However, the two biggest changes driving a more collaborative attitude from the grain company side are the need for companies to run their systems at nearly full capacity and the growing share of their business that is not just undifferentiated bulk commodities.
On the one hand, the companies can’t afford to jerk around the smaller number of farmers who they will need to feed their ever-running systems, while on the other farmers with specific higher value crop types need to make sure they are hearing about opportunities from the buyers. It is making farmers and companies more co-operative, whether they like it or not.
“It’s OK for all partners to do well in a transaction,” FarmLink Marketing co-founder Mark Lepp told me, summing up the new attitude out there among some farmers and buyers.
“If you’re both going into a discussion thinking the other guy is trying to screw you, it’s not going to work out well.”
It’s been a big hurdle for people to get over on both the farmer and company sides, with very little trust existing a couple of decades ago. Old hostilities are hard to get over with each side able to recall incidents that have created grievances that have ended up as part of a powerful mythology of distrust.
But as the prairie grain market transforms itself from low-efficiency, bulk commodity production into one of high-speed, premium crop production, perhaps that mythology can begin to weaken its attractions and farmers can ease into a closer collaboration with those who seemed at one time to be akin to opponents.
As Lepp pointed out, “it’s unique to the grain business that it’s an adversarial relationship.”
It’s time to find a different approach, and thousands of farmers have already begun the attitude switch.