CWB: one year in an open market

Farmers weigh in | Has the transition from a single desk to an open market been good for farmers?

It’s been one year since the western Canadian grain industry took its first steps into the world of open wheat marketing.

For some farmers, the transition away from single desk marketing has been a positive step forward.

But according to others, those first steps were more akin to stepping off a cliff.

Glenn Tait, a farmer from Meota, Sask., and director with the National Farmers Union, thinks changes made to CWB last August have come at a huge cost, not only to his own bottom line but also to Western Canada’s reputation as a reliable supplier of top quality wheat.

Tait, who normally produces 1,000 tonnes of high quality milling wheat each year, estimates that marketing changes implemented last August have cost his farm $75,000 in the past 12 months, or $75 for each tonne of wheat he harvested in the 2012-13 crop year.

That estimate is based on data that shows the price differential between high protein milling wheat and low protein feed varieties all but disappeared last year.

Tait said the price differential between a tonne of No. 2 high protein bread wheat and a tonne of higher-yielding, low protein wheat used for feed or ethanol production has averaged $79 over the past seven years.

In 2012-13, the price differential was less than $5.

Tait said western Canadian farmers no longer have a financial incentive to produce high quality milling wheat.

“Thanks to (prime minister) Stephen Harper and (agriculture minister) Gerry Ritz, I now have more stress, more work and less money,” he said.

“The numbers that I have researched clearly indicate that I have less money now than I would have otherwise.”

On Tait’s farm, which is within 200 kilometres of two ethanol plants, next year’s wheat crop will include more acres of high yielding, low protein varieties such as AC Andrew and Sadash.

Milling wheat acres will be reduced.

Tait still hopes that premiums for high protein milling varieties will eventually return to the markets, but he doubts they will ever return to pre-2012 levels.

“I think it will come back a little, but it will never approach the $79 per tonne average that we used to get,” he said.

“Protein is still worth something, but without the Canadian Wheat Board there to kind of extort money from the marketplace, it’s worth as little as people are going to pay for it.”

John DePape, a market analyst and risk management expert from Winnipeg, said Tait’s assessment of wheat markets and CWB’s influence on pricing is misinformed.

DePape said Tait and others have overlooked the fact that North American farmers produced ample supplies of high protein milling wheat last year. As a result, premiums for high protein wheat were harder to find.

At the same time, drought across much of the U.S. corn belt pushed the price of corn and other feed grains to near record levels.

“What Tait fails to see is that the price of feed wheat is a function of other feed grains, such as corn,” DePape said.

“Corn hit record prices this past year, gaining ground on wheat prices just about everywhere in the world….This would be the same with or without the single desk.”

Rob Brunel, a grain farmer from Ste. Rose du Lac, Man., said it’s still unclear whether his bottom line was positively or negatively affected by the loss of the single desk.

“It’s tough to compare because we really aren’t comparing apples to apples at any point in time,” he said.

He said the most noticeable changes were related to delivery opportunities.

Brunel delivered his entire wheat crop in two blocks this year, one shortly after harvest and the other in mid-winter.

Delivery opportunities were good and the transportation system performed well despite tough conditions.

Brunel is not anticipating any significant changes to his wheat acreage in 2014.

“I guess I’ve always been a believer that … (neither) system is going to pay me a whole lot more.

“I wasn’t disgusted with the old system and nor am I ecstatic about the new one. I guess I’m satisfied.”

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