The once unassailable principle of pooling is being debated within the Canadian Wheat Board.
As the grain marketing agency looks to offer farmers more pricing options and flexibility, it is running up against one of the pillars of CWB operations – maintaining the purity of price pooling.
That has prompted a debate around the board table over whether farmers are best served by the existing pooling or whether there are alternatives that would provide a net benefit.
“The debate at the board is how far you can go with pricing options and still be consistent with pooling, or do minimal damage that would be seen as acceptable,” said CWB director Bill Nicholson of Shoal Lake, Man.
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It’s an issue that the board’s elected directors will be putting before producers at the annual corporate accountability meetings beginning this week. As part of a discussion called Examining the Pooling System, farmers will be asked to consider six questions:
- What are the benefits of pooling?
- What are the alternatives?
- What is the business case for each alternative?
- What are the advantages and disadvantages?
- How can pooling best be used to maximize returns to farmers?
Price pooling has long been considered one of the three pillars of the CWB, along with single desk selling and government financial guarantees, and the notion of tinkering with the system was almost unthinkable.
That is no longer the case.
“There has been a shift,” said one CWB official. “It’s a discussable issue and it wasn’t before.”
Farmers are already able to price grain outside the pooling system using fixed price or basis contracts. Now more radical proposals are being put forward, such as year-round cash pricing, shorter pooling periods, separate pools for separate contracts and allowing farmers to price grain into specific markets. None have been accepted, but nor have they been rejected.
The pooling system is not about to be dismantled, and no fundamental changes are planned for 2004-05, but ideas that would once have been dismissed as undermining pooling now receive serious analysis and discussion.
Even as staunch a supporter of pooling as CWB director Art Macklin of Grande Prairie, Alta., is willing to at least look at alternatives.
“I’m not opposed to exploring it, so long as we carefully understand what pooling accomplishes and we understand exactly what we’re doing if we compromise pooling,” he said.
“I’m not sure the benefits will outweigh the costs.”
Supporters of pooling say it’s an effective risk management tool whereby all farmers share in the highs and lows in the market regardless of when or where they deliver. Critics say pooling limits their ability to generate cash flow and get the best price.
While some farmers have agitated for more freedom to price their grain outside the pool, the board’s internal surveys indicate that producers generally support pooling.
In addition, few farmers use the existing programs that allow them to bypass the pool. This crop year, 391 farmers took fixed price contracts and 363 took basis contracts, raising the question of how interested farmers really are in opting out of the pool.
The early payment option, under which the farmer remains in the pool, is more popular, with 7,584 participants as of Jan. 2.
One possible change for 2004-05 is extending the July 31 sign-up deadline for fixed price and basis contracts.
“Farmers are understandably reluctant to participate because they don’t known the tonnage they’ll have to sell,” said director Rod Flaman of Edenwold, Sask., who thinks the deadline could be extended by 60 or 90 days.
