Traders rely on data | The USDA collects and publishes reports to help set futures pricing
MINNEAPOLIS, Minn. — The CWB monopoly is gone, but some Minneapolis hard red spring wheat traders think a shroud of secrecy still surrounds Canadian grain.
They worry that the poor quality of data coming out of Canada hurts the wheat futures market and farmers’ ability to receive fair prices.
“It’s an open market now, so somebody’s going to have to step up to the plate,” said Frontier Futures Minneapolis branch manager Scott O’Donnell.
His colleague, Austin Damiani, said Canadian and American spring wheat growers probably receive poorer prices than they would if there was a good flow of Canadian information about crop production, stocks and sales similar to what the U.S. Department of Agriculture routinely produces.
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“You need that objective, transparent information for the free market to work,” said Damiani.
“The farmer has to have access to that information or he just has to accept what the elevator company says.”
Minneapolis spring wheat futures are generally the least-traded market for North American wheat crops, behind Chicago soft red winter and Kansas City hard red winter, even though hard red spring wheat production in Canada and the U.S. far surpasses that of other wheat types in North America.
Spring wheat futures traders and users had hoped that an open grain market on the Prairies would assimilate the Canadian and U.S. wheat areas and make them function as one big crop.
It had also been hoped that there would be a tight relationship in U.S. and Canadian prices and grain would flow back and forth across the border as prices and logistics dictate.
However, various controls restrict the easy north-south flow of grain, at least by farmers. As well, regulations impinge shippers’ ability to connect railroad systems. Also, different sets of statistics and data are collected in the two countries.
The latter problem upsets traders and economists because they depend on the vital statistics that reveal the size and shape of crops and how stocks are moved, sold and exported.
The USDA collects and publishes frequent reports on information that isn’t collected in Canada on a national scale, such as crop progress and production reports.
Winnipeg analyst Chuck Penner said people trying to assess the state of Canadian crops are forced to rely on a dog’s breakfast of provincial crop reports.
“The provincial crop reports are very inconsistent,” said Penner.
“You’ve got a whole mishmash of stuff you try to marry up. You have to extrapolate a lot.”
He said getting a comprehensive Canadian view is difficult because each province looks at different aspects of crops and publishes by different schedules.
The same applies for a few other reports that the USDA issues, but they come out more sporadically in Canada or not at all.
Penner said Canada does a better job of reporting some parts of the commercial grain trade. For example, the United States does not have good numbers for farmer deliveries into the grain elevator system, but Canada does.
However, Canada has much less export sales and export movement data, which is vital for assessing many demand factors.
As well, Penner is still annoyed that the vessel lineup of ships on the West Coast and at Thunder Bay, formerly published by the Canadian Ports Clearance Association, has been discontinued, just when more transparency was needed because of the end of the CWB monopoly.
“Those vessel lineups were invaluable in terms of getting a sense of what’s happening with pipeline stocks, what needs to be moved, what pricing might farmers see,” he said.
What bothers him most is the lack of mandatory price reporting of grain prices. The U.S. and most other countries force grain buyers to reveal prices at certain crucial points, but Canada does not, keeping essential price information out of farmers’ hands.
“I’ve really run into a wall there,” said Penner, who has asked grain companies to supply data.
“Every other country, it seems, you get cash prices.”
Damiani said CWB used opaque pricing as a tool to give it an advantage from its sole possession of certain data.
However, now that the monopoly is gone, farmers need to make sure that private interests such as grain companies don’t use the lack of data to deprive them of one of the few levers they have in the grain system: the sense of when the grain companies need to buy from them to complete sales.
Penner said he would like to see a better co-ordination of provincial crop reporting systems. He also said there’s no reason why mandatory price reporting can’t be ordered, implemented and provided to farmers.
“What you need is Agriculture Canada or Stats Canada or the Canadian Grain Commission to be given the mandate to do it,” said Penner.
Damiani said there might even be electronic ways to collect data, such as weekly online surveys of farmers about the state of their crops and grain stocks. Farmers have the most at stake, so they need to find a way to get better data.
“The push has to come from the producers,” said Damiani.
