Ontario wheat farmers have been given a choice, and they’re choosing the open market over their provincial marketing board.
This year marks the first time wheat growers in the province have been able to sell their entire crop either through the Ontario Wheat Producers’ Marketing Board or to private grain buyers.
It’s a system similar to the dual market or voluntary wheat board proposed by some western farm groups as an alternative to the Canadian Wheat Board’s single desk authority.
While no official numbers are yet available, Ontario wheat industry officials say the province’s growers are abandoning the board in droves.
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“The word in the trade is that it’s a landslide away from the wheat board,” said Jeff Reid, marketing manager for C&M Seeds of Palmerston, Ont.
It’s estimated that 70 to 80 percent of the record 2.2 million tonne wheat crop grown in the province this year will be sold off-board under what is called the direct marketing option.
Delegates to the Ontario board’s annual meeting in July 2002 voted to give farmers complete freedom as to how to sell their crop beginning this year. Previously, a limited percentage could be sold off-board.
Some say the stampede to the open market simply means private buyers are offering a better price than the board at the local elevator.
“That could be the only reason,” said Jim Whitelaw, a grain trader with of FGDI of Blenheim, Ont. “They’re certainly not going to sell outside the board if the board has the better price. It’s economics 101.”
But others say it’s more complicated than that, arguing that the board’s ability to compete is limited by structural and logistical factors.
For example, farmers don’t have to indicate whether they’re selling off-board until the day of delivery.
“That really put the writing on the wall,” said Reid. “The private trade could outbid the board at the eleventh hour and that’s clearly what was happening.”
The board has also traditionally offered the same landed basis price regardless of location, while private traders are able to adjust their price to reflect local market conditions.
The new uncertainty over supply makes it difficult for the board to forward sell large volumes, which has always been a strength of single desk selling.
As well, a pooled price, which reflects the average price for a 12-month period, is never going to compare favourably with a daily spot price, especially in a rising market, as has been the case in Ontario this season.
Ontario wheat board chair Bruce Webster, who farms near Little Britain, Ont., acknowledged farmers seem to be rejecting the board, but he cautioned against reaching conclusions based on one year’s experience.
“It’s a new game they haven’t been able to participate in before and everybody wants a piece of the action this year,” he said.
“It’s another option and they’re trying it big time but it will take two to three years to sort out.”
He said the board will analyze what has happened and try to be more competitive, by for example, offering site-specific pricing.
At the end of the day, he said, the decision as to whether the board can continue to operate as a grain marketing agency will be determined by the province’s wheat growers.
“Our producers asked for choice and we’ve given them choice and they’re exercising it,” he said.
He suggested that if farmers don’t want to sell through the board, the former monopoly seller might give up its selling role and become a farmer association and lobby group.
The board itself has also gone through some internal turmoil, with three general managers and two marketing managers in the past year.
