A new Canadian Wheat Board program designed to give farmers more control over when they deliver grain will get a test run in 2006-07.
Under the new delivery exchange contract, a farmer who wants to deliver grain sooner will be able to swap delivery opportunities with a farmer who is willing to wait.
If the program is a success and extended across the Prairies, it should help satisfy critics of single desk marketing, said CWB chair Ken Ritter.
It would then be difficult to argue that the single desk marketing system denies them choice and opportunity.
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“We believe we can have a strong single desk with choice and make it work, and with this program, combined with producer payment options, we’re a long way towards that goal,” said Ritter.
The board said the new program is a response to demands for more flexibility, predictability and control over delivery.
In a recent CWB survey of producers, 92 percent of respondents said they would like to choose when to deliver and be paid in full for their grain.
CWB director Rod Flaman, who had made establishing a delivery trading system one of his priorities, said that has essentially been accomplished.
“We are coming closer and closer to a cash pricing scenario. There is no restriction on a producer’s ability to either price or deliver their crop.”
He said the program will provide farmers who want to boost their cash flow early in the crop year the chance to do so.
“Essentially, constraints on delivery equal constraints on cash flow,” said Flaman.
“If we can provide more flexibility on delivery, we can provide more flexibility on cash flow.”
Under the pilot project, the delivery contracts, which will carry guaranteed 100 percent acceptance, will be made available beginning Aug. 1 to farmers in southern Saskatchewan (rail zones CN-3 and CP-12). The program will be capped at 250,000 tonnes.
Here’s an example how it will work:
- Farmer A takes out a delivery exchange contract for 400 tonnes of No. 1 CWRS 13.5 percent protein wheat. There will no individual tonnage limit.
- The board will allocate that in equal amounts (100 tonnes each) over four delivery periods: August to October, November to January, February to April and May to July.
- The producer indicates at that point or later that he wants to deliver all 400 tonnes in period 1 and will trade away his delivery rights in periods 2 to 4.
- Farmer B has taken out a contract and is willing to give up his delivery opportunity in period 1 and make his deliveries later in the year.
- That information from the farmers is posted on the CWB website. The board will also provide each with a list of farmers with whom he might make a trade.
- Farmers A and B contact each other and negotiate financial or other arrangements to swap delivery periods.
- They then inform the board, which prepares documents for signing.
Flaman said his main concern with the program is that most producers will want to deliver early in the crop year.
“The biggest hurdle is the number of people who will actually want to delay their delivery.”
He said it will be up to those who want to obtain the early delivery to make it worthwhile for those being asked to wait.
Flaman suggested grain companies might get involved in the program, helping farmers work out swaps that will provide the grain handlers with the right mix of grain at the right time.
Fran Malecha, head of Saskatchewan Wheat Pool’s grain operations, said that could be the case.
“I think there is potential for grain companies to get involved,” he said.
However it’s too early to say whether grain handlers might provide financial incentives to encourage delivery swaps, he added.
