The Western Canadian Wheat Growers Association has been cross-border shopping and has determined there are better durum deals on the American side of the 49th parallel.
But according to the Canadian Wheat Board, the group is not making apples-to-apples price comparisons so the conclusion is fundamentally flawed.
The wheat growers association determined that the elevator price in the Golden Triangle region of north-central Montana has averaged $9.71 per bushel for No. 1 durum with 13 percent protein so far this crop year. That compares to a CWB Pool Return Outlook price of $8.51 basis Alberta.
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A further analysis shows that an index of durum price quotes from about 40 U.S. elevators in northern tier states published by the Minneapolis Gran Exchange has averaged $9.50 per bu. That compares to a CWB Pool Return Outlook of $8.41 basis Saskatchewan, where most durum in Canada is grown.
“The CWB monopoly is costing me and other farmers a bundle,” said Stephen Vandervalk, Alberta vice-president of the WCWGA.
CWB spokesperson Maureen Fitz-henry said cross-border comparisons are problematic. In this case, there is a flawed assumption that all Canadian durum could be sold into the lucrative U.S. marketplace.
“They can’t take it all. They won’t and they couldn’t. We have to sell all over the world,” she said.
The CWB has sold almost 600,000 tonnes of durum into the U.S. in 2008-09.
“We are selling into the U.S. at very good prices. We are getting prices above the prices that (WCWGA) are quoting for the U.S.,” said Fitzhenry.
Even if Canada could service the entire U.S. durum market, sales would amount to 1.85 million tonnes, which is slightly more than half of this year’s anticipated export program of 3.5 million tonnes.
The board has to find other homes for durum, some of which do not pay as much as the Americans, she said, which is why the PRO price is lower than the averages calculated by the WCWGA.
She noted the WCWGA analysis also failed to account for quality discounts and transportation costs. The board estimated it would cost 83 cents per bu. to access Montana’s Golden Triangle area by truck from southern Alberta and $93 cents per bu. by rail.
“Once these costs are taken into consideration, the perceived gap between the U.S. elevator bids and the PRO disappears,” said Fitzhenry.
The wheat growers’ complaint with the board’s marketing practices doesn’t stop with prices. The association said the CWB has accepted 74 percent of the tonnage contracted by durum growers and doesn’t intend to make further contract calls for the remainder of the crop year.
The result is that prairie farmers will have to carry food quality durum into the 2009-10 crop year or sell it into lower-priced feed markets. That means extra storage costs and further delays in paying off loans.
A portion of fertilizer costs incurred in the fall of 2007 for this year’s crop will have to be financed until December 2010 when farmers receive final payment for their 2009-10 durum deliveries.
Farmers may be forced to sell non-board grains like canola, oats, peas and lentils earlier than they would like to generate cash flow to keep current on those loans.
“CWB employees should not have the power to restrict my grain sales and limit my earnings,” said Cherilyn Jolly-Nagel, past-president of the WCWGA.
“The decision to hold inventory or not is a basic business decision that should be left in the hands of the farmer.”
Fitzhenry said producers are aware that it is rare for the board to accept 100 percent of the contracted durum. Growers tend to plant more durum than the board can take in any given year because it usually fetches a premium over other types of wheat.
The board will end up taking 80 percent of the durum contracted this year. She doubts growers would want the CWB to take all the durum available and dump it on the market at bargain basement prices amounting to a small premium over feed wheat.
Fitzhenry said growers will be receiving the second highest price on record for their durum in 2008-09 and projections for the upcoming year are for the third highest pool return.
