Co-ordination, pricing | Producers learning to assess contracts, deal with buyers
Like many other prairie grain growers, Chuck Fossey is reserving judgment on whether farmers are better off now that single desk grain marketing is a thing of the past.
“I think it’s still a little bit too early to say how the new system is working after just one year,” said Fossey, who farms near Starbuck, Man.
“We had a year where we had very high prices due to the U.S. drought situation … we didn’t have any real transportation problems and with grain prices where they were, it didn’t seem to matter how you marketed your grain, you should have been able to make some money.”
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Fossey’s assessment? The open market worked pretty well in 2012, but it could be years before a complete picture emerges.
“I think the big question is going to come two or three years down the road,” he said.
“What happens when we have a really bad fusarium year? How willing are grain companies going to be to handle that wheat? What happens when we have a lot of congestion in the handling system or some major rail problems? Who’s going to be fighting for the farmers then?”
And what happens when global wheat stocks rise and prices drop?
“If we’re talking $5 wheat and a glut of grain everywhere in the world, you might find that farmers are not quite so happy then. I really think we’ll have to wait and see.”
Some observers say 2012 might have been the perfect year in which to end single desk marketing.
With prices where they were, prairie wheat growers were a happy lot during the 2012-13 crop year, regardless of the marketing system in place.
Fossey normally plants 1,000 to 1,300 acres of wheat each year. In 2012-13, he sold roughly 50 percent of his milling wheat through the voluntary CWB and 50 percent through line companies.
He estimated that the prices he received through CWB’s Early Delivery Pool were slightly better than what he would have received elsewhere.
But delivering CWB grain was not always a hassle-free exercise.
“I know of at least one hiccup that occurred personally when I was marketing grain to the CWB,” he said.
“In this new open marketing system that we have, there’s a little bit more co-ordination or communication that has to take place between the (CWB), the grain companies and with producers themselves.”
Producers are still getting accustomed to dealing with different buyers and contracting with private sector companies, he added.
“You’ve got to be careful when you’re talking to the grain companies about pricing grain because every company is quoting you a different protein or maybe even a different grade.”
Producers who contract grain pre-harvest must be aware of potential price discounts and need to pay close attention to protein spreads and grade discounts, which often aren’t clearly defined in contracts.
“If you’re signing a contract basis these specs but what you deliver has a different spec, a lot of the time, you don’t really know what the spreads are going to be.”
Kent Erickson, a wheat grower from Irma, Alta., and director with the Alberta Wheat Commission (AWC), said the industry is still getting used to buying and selling grain under the new system.
From his perspective, the experience has been positive.
“I would say I was very happy, especially with grain movement this year,” Erickson said. “It seemed like elevators and the rail companies really are able to move grain very efficiently.”
Erickson said his farm benefited from improved delivery opportunities and more competitive pricing.
Augers and trucks also got a break. Equipment spent fewer days moving grain, and the crop was shipped to market more efficiently than ever.
“In the past, canola and peas were the two crops that I used to sell straight off the combine, and the wheat was something that you would haul whenever they would come out with a 25 percent call,” he said. “Now, I can manage my entire grain inventory and my storage more efficiently.”
Lynn Jacobson, a producer from Enchant, Alta., said the industry is identifying gaps that emerged after the single desk was eliminated.
Under the old system, CWB was involved not only in marketing but also in promotion, branding, market development, customer relations, farmer advocacy and helping domestic wheat breeders identify emerging market trends and breeding priorities.
“A lot of those issues have sort of fallen off everyone’s to-do list,” said Jacobson, an AWC director and president of the Alberta Federation of Agriculture, formerly Wild Rose Agricultural Producers.
“We (the AWC) are taking initiatives to pick up some of those (tasks) that the CWB did, but it is quite a steep learning curve.”
Erickson said the industry didn’t understand all of the functions performed by CWB.
“I think we really need to pick up the ball now and get the word out there to international customers that we’re still open for business,” he said. “It’s a little bit of a different environment now, but our grain hasn’t changed, our quality hasn’t changed and our ability to produce high quality wheat hasn’t changed.”
