Some growers and processors say a new bean auction system is not worth
a hill of … well, you know.
Companies like H.J. Heinz Company and Britain’s Premier International
Foods have a new way of buying navy beans through what is called a
reverse auction.
That’s where buyers establish a maximum price for a particular lot of
beans and invite processors to bid against one another to get the
shipment. The lowest bid is awarded the business.
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Altona, Man., bean grower Dan Penner said the end result of such a
procurement system is a lower price for producers.
“This seems to drive the price down quite drastically in a short period
of time,” said the past-president of the Manitoba Pulse Growers
Association.
He said it is unfortunate that companies such as Heinz have adopted
this type of system because it skews the market for navy beans, which
are canned and sold as pork and beans or tomatoes and beans on grocery
store shelves.
“It’s almost like you’ve taken competition right out of it and Heinz is
just kind of trying to control the market and truly that doesn’t
reflect well on producer prices.”
Frank Reimer, president of Winkler, Man., special crops processor
Global Grain Canada Ltd., agrees.
“It’s very good for the buyers because they have us fighting each
other. It’s ridiculous. I don’t like it.”
He said it is a familiar story of a few big multinationals being able
to dominate the market.
“There are so few buyers that at least for the time being they can
control the price. There is too little competition.”
He estimates that Heinz and Premier together buy about 40 percent of
the North American navy bean crop through their auctions. On the flip
side, there is a glut of processors selling navy beans that they buy
from farmers.
“If there were few enough sellers, you could persuade each other and
say let’s not be a fool and sell them for too little. But now there’s
always a seller out there who gives them away.”
Under the current circumstances it is impossible to get a higher navy
bean price even when demand outweighs supply, said Reimer.
“Not growing them for awhile would perhaps help but that’s also
dangerous because then other countries will do it.”
Not all processors are concerned about the reverse auctions. Martin
Chidwick, special crops trader with Agricore United, likes the system.
“It fast-tracks you to a value and it is basically more transparent.”
He said it is not much different than the old system where buyers
gathered price information behind the scenes and used that information
to negotiate lower prices.
Buyers give processors advance notice of when they are scheduling an
auction, giving people a chance to prepare.
“I don’t think it’s something to be afraid of,” said Chidwick.
But he agrees with Reimer that no matter what sourcing system is
employed, there is a fundamental problem with marketing navy beans
destined for canning markets.
“The fact of the matter is that there are few canners and many
processors.”
Penner said navy bean stocks were tight last year but prices never
rose. This year he decided not to plant any, concentrating instead on
pintos and blacks.
“When growers are subject to large cheque books of large companies,
rather than supply and demand letting the market dictate what prices
should be, they really can be in trouble.”
