Some processors against navy bean auction

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Published: August 22, 2002

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.”

About the author

Sean Pratt

Sean Pratt

Reporter/Analyst

Sean Pratt has been working at The Western Producer since 1993 after graduating from the University of Regina’s School of Journalism. Sean also has a Bachelor of Commerce degree from the University of Saskatchewan and worked in a bank for a few years before switching careers. Sean primarily writes markets and policy stories about the grain industry and has attended more than 100 conferences over the past three decades. He has received awards from the Canadian Farm Writers Federation, North American Agricultural Journalists and the American Agricultural Editors Association.

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