OTTAWA – The Canadian Wheat Board is planning a new pooling system that would pay some southern prairies farmers a premium for grain destined for the U.S. market.
By creating an American pooling point with a natural “catchment area” in the Southern Prairies, farmers who sell to the board in an area where shipment south is likely will receive a premium because less transportation cost will be deducted at delivery.
“It will recognize the natural advantage of being close to a premium market,” a board official said Monday. He spoke on the condition that his name not be used.
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He said wheat producers in southern Manitoba, feed barley producers in southern Alberta and malt barley producers in southern Manitoba and southern Saskatchewan will be the main beneficiaries.
For southern Manitoba wheat producers, for example, the benefit might be $2 or more per tonne delivered.
According to government and board officials, it will be part of the package of changes to be implemented when the eastern pooling point is moved east from Thunder Bay, effectively increasing the cost of eastern Prairies farmers who ship east through the seaway.
Government officials say it will give southern Manitoba farmers an alternative to higher-cost eastern shipments.
And they hope it will defuse some of the pressure from farmers who have been agitating to go outside the board system to take advantage of higher spot prices in the U.S.
Frustration may increase
Some expect agitation to increase in the wake of the deficit-cutting February budget that will end east-west transportation subsidies on export grain.
Without subsidies, pressure could increase on the government to allow farmers to sell where they can get the best price. For those who farm close to the U.S. border, that best price may well be found to the south.
“As long as the U.S. has export subsidies, prices there will be attractive and Cana-dian grain will be drawn toward that market,” said Howard Migie, head of the Agriculture Canada team working on changes to the western grain system “Changes that the wheat board are planning will recognize that advantage.”
However, the new system will not come close to matching the price premium that sometimes can be had in the U.S. Benefits of higher revenues that flow from American sales still would be distributed equally through the price pooling system.
Migie said board transportation deductions under the new rules will be based on four ‘catchment’ areas – regions that produce grain most likely to go south, through the West Coast, through the seaway and through Churchill.
Each catchment area will have a different deduction for freight costs, based on distance from the natural market.
Meanwhile, agriculture minister Ralph Goodale has signalled that he will not be sympathetic to those who use elimination of freight rate subsidies as another argument against the Canadian Wheat Board price-pooling system.
He did concede that farmers being forced to take lower prices because of higher freight charges will be looking for the best prices they can find.
Some will argue they should be able to sell directly into markets if they can get a better price than the wheat board pooled price.
“Undoubtedly, there will be debate about that but I would not accept that the result of the debate is a foregone conclusion,” Goodale said.
