A new Canadian Wheat Board program designed to promote value-added processing will provide a limited benefit to farmers, says an official with a Manitoba farm organization.
“We’re pleased to see the board offering more flexibility in the system,” said David Rolfe, president of Keystone Agricultural Producers.
“But there will be a limited number of producers who will be able to take advantage of this.”
Under the new value-added incentive program, known as VIP, farmers who deliver wheat or barley directly to an eligible mill or malting plant will be paid a premium of $3 a tonne.
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The twice-yearly payments will be applied retroactively to all grain delivered since Aug. 1, 2004.
The $3 per tonne represents the amount of money the board would have to pay in storage and carrying costs if that same grain was delivered to a primary elevator before being forwarded to the processing plant.
In announcing the program Sept. 13, wheat board chief executive officer Adrian Measner said that in addition to the $3 premium, farmers will benefit from earlier delivery opportunities and possibly higher pool returns.
Millers and maltsters may benefit if more farmers offer grain for direct delivery, providing the processors with greater ability to select specific lots of grain to meet their quality needs.
The board also said VIP responds to criticisms that it acts as a barrier to value-added processing by coming between the farmer and the processor.
“We’re trying to address that concern,” said Earl Geddes, the board’s vice-president of farmer relations.
Rolfe said the $3 premium is nice, but won’t go far in covering additional trucking costs involved in hauling to a mill or maltster.
“Those producers who live relatively close may take advantage of it to put a few extra dollars in their pockets,” he said.
Revenue neutral
CWB spokesperson Louise Waldman acknowledged that not all farmers will have the same chance to get the VIP premium, but said it’s important to note that the program is revenue neutral – in other words, the premium is not being paid out of the pool accounts at the expense of other producers.
“It’s not going to help you if you live in Dauphin, Man., but it’s not going to hurt you if others do use it,” she said.
The board expects the program could double the amount of grain farmers deliver directly to processing facilities, to about 20 percent of total deliveries.
“If that were to double over the next couple of years, that’s certainly in the best interests of producers and of the system as a whole,” said Geddes.
However he added that given the quality problems of this year’s crop, millers might be more reluctant to take individual truckloads of wheat than if the crop was of uniformly high quality.
There are also good operational reasons for processors to have long-term supply agreements with grain handling companies for regular deliveries of 20 or 25 rail cars.
The more grain farmers deliver directly to processors, the less grain will be delivered to primary elevators, meaning VIP could potentially result in lost revenue for grain handling companies.
However, Radean Carter of Agricore United said the company doesn’t expect the program will have much effect on its grain handling volumes.
“Most end-users prefer to go through a grain handler like us because we add value to the product they receive,” she said, in terms of volume, quality control and just-in-time shipping. “If the end-user finds value in that, they’ll continue to use our services.”
