Farm Corp Marketing International is two years into its five-year mandate to negotiate an international floor price for wheat. It’s a lofty goal that seems unattainable but the company insists it is making progress.
Along the way, Farm Corp has morphed into something more than an advocate for change. It is now operating as a brokerage firm, making grain deals on behalf of its members.
The company got its start in the winter of 2000 when founder Rick Pender announced it was time for farmers to stop grumbling about low commodity prices and take matters into their own hands.
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He set up a farmer-owned marketing group that is attempting to form a cartel to establish a minimum price for wheat of $10 a bushel basis export position, which is almost double the price that good quality Canadian milling wheat is expected to fetch in 2003-04.
The original plan called for 200,000 to 300,000 farmers in the five major wheat exporting nations to put 70 million tonnes of wheat under contract with Farm Corp. Members could then vote to pull that wheat off world markets in an attempt to drive prices higher.
At the time, an annual membership in the company cost $100. It has since risen to $200, or farmers can pay $500 for a five-year contract.
Canada was the starting point for the Calgary-based company’s membership drive.
The goal was to have 10,000 to 15,000 prairie farmers sign marketing contracts by the end of 2001. Nearly two years later the company has managed to sign between 900 and 1,000 farmers in Saskatchewan and Alberta, which is the same amount it reported on the books in May 2001.
Growth has been slow.
Pender estimated 2.5 million tonnes of wheat, or three million acres, are under contract in Canada. Another 500,000 acres have been committed in the United States.
Revised goals call for 30,000 to 50,000 farmers worldwide, 3,000 to 3,500 of which will come from Canada. But the group still requires 50 to 70 million tonnes of wheat.
“We don’t necessarily have to go sign up every single farmer in the whole wide world to get that tonnage. It’s sitting there already in centralized blocks. We possibly could go that route,” said Pender, referring to the large volumes of grain handled by the Australian and Canadian wheat boards.
Even with new targets in place, the company is still a long way from where it wants to be by 2006. Wheat is selling for about half of Farm Corp’s stated floor price and the company has less than 10 percent of the production it needs under contract.
But Pender is confident there will be some progress this winter.
“We’ll be launching a full series of meetings in Alberta and a few in Saskatchewan this year to get the project back on track again,” he said.
Farm Corp will also be looking overseas to increase the amount of wheat it has under contract. It has talked with Centaur Grain, the largest farmer-owned grain company in the United Kingdom. Centaur has 1,300 members who produce 1.5 million tonnes of grain annually.
There have been no detailed discussions on how the two companies can work together, but Pender is confident there is a fit.
“We’ll really sit down and talk some turkey this winter about how this can all work.”
Centaur provided the inspiration for Farm Corp’s second phase, the Western Canadian Grain Marketing Project, which started this year as a way for the company to act as a commodity broker for its members.
“We’re an agent for the farmers to sell their grain,” Pender said.
Farm Corp uses its membership base to provide bulk sales of grain to buyers in an attempt to find a better price for growers. Pender said grain companies are prepared to pay premiums for grain sold in large blocks.
“That’s very heartening and it shows to farmers in a live working model how it works,” he said.
The company also has a day-to-day best price program. Farm Corp makes a commitment to its members that within 48 hours it can match or exceed the best price farmers can get for their grain in their local area.
“We’ve been fairly successful to do it on most occasions,” Pender said.
Farm Corp attempts to extract a $1.50 per tonne commission from buyers on every transaction it makes on behalf of its members.
“If we don’t make the farmers money, then we don’t extract anything. We leave it alone,” he said.
The commission and membership money, is used to finance the ultimate goal of establishing a $10 per bu. international floor price for wheat.
