CARSELAND, Alta. Ñ A new sales program to price grain using the American spot market could be too successful and undermine the Canadian Wheat Board, according to board director Jim Chatenay.
The new daily price contract program is a pilot project that allows farmers to sell wheat at a posted price based on an average of U.S. elevator prices.
Chatenay, who opposes the wheat board’s sales monopoly, said if the program proves highly popular, more farmers could decide not to join the pool accounts, which pays all farmers an average price for sales made throughout the crop year.
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“Beware. If it’s too successful it poses a problem for the board of directors,” said the District two director in an interview at a farmer meeting in Carseland March 8.
The program was designed with considerable discussion around the wheat board table to guarantee the pool accounts remain stable while providing options to those interested in different marketing approaches.
“We the board have to protect the pool account and that ticks off some farmers,” he said.
“Maybe it’s not as good as it’s going to be but if it’s too good and if everybody sells their own grain … maybe we don’t need the single desk,” he said.
There is no limit on tonnage per producer but it is not meant for brokers where a single entity could book all 500,000 tonnes on offer this crop year.
“We don’t want it to be used as a speculation tool,” said Brian Wittal, a CWB farm business representative.
Wittal said this program could help some manage price risk or help organic producers involved in a direct sale.
“Any organic production that is signed to this program will be over and above that 500,000 tonnes,” he said.
Prices will be posted daily as of June 1 and producers can start pricing on grains committed to the program as of Aug. 1.
Producers may sign up a minimum of 20 tonnes of grain as of June 1 and can withdraw from the contract in the event of crop failure before Aug. 1 with an administration charge of $15 to close the contract.
Pricing will run from Aug. 1 to July 31, 2006, and deliveries are made through regular CWB delivery calls.
Prices are an average chosen from six randomly selected United States elevators’ daily spot prices.
Cash market spreads for the quality, grade and protein difference above or below the base grade will be set at the time of cash settlements when a grain ticket is settled at the elevator.
Upon delivery producers receive an initial payment and the balance is sent within 10 business days.
“If you don’t like that premium or discount and you think it is too wide that day, you can have them hold off cashing the cheque for you until the premium narrows or widens. It is established the day you have them cut the cheque to you,” Wittal said.
Farmers must pay attention to what happens in this market because if buyers are not active in the U.S., prices and spreads could be wide.
“The daily price basis will be more volatile but will tend to average about the same as the pool basis over time,” Wittal said.
The board will automatically price unpriced grain by July 31, 2006.
Steve Snider, an organic grain grower from central Alberta, said the program does not make his job easier because he is still confused about how it works.
He told the meeting it may not work well in practice because farmers still carry too many risks if there is a crop failure and obligations cannot be met.
“That program has a lot of nuances in it to show up that the pooling system is the best. Why would I enter into a contract where I know I’m going to lose versus the possibility of maybe getting my pooling price right and maybe getting a little back out?” he said.
