Coffee row denizens debating the merits of single desk selling will
soon have some new numbers to chew on.
The Canadian Wheat Board is finally ready to release the results of its
first attempt at benchmarking.
The goal of benchmarking is to compare the net farmgate price farmers
receive under single desk selling with the net price they would have
received under identical market conditions if there was no monopoly
sales agent like the wheat board.
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CWB director John Clair, chair of an internal committee overseeing the
benchmarking project, said he expects the results to be made public by
the first week of March.
“We’re going to be moving forward with this,” he said Feb. 21. “The
business of waiting on the U.S. is behind us now.”
The CWB decided not to release the results of benchmarking until after
the U.S. Trade Representative ruled on a trade complaint against the
board. The USTR handed down its ruling on Feb. 15, declining to impose
any sanctions against Canadian wheat shipments to the U.S.
The economist who developed the benchmarking system for the board says
the ultimate goal is to compare the bottom line for farmers under
single desk selling versus the open market.
But he conceded that’s easier said than done.
“No amount of analysis is going to be able to make a perfect
comparison,” said Richard Gray of the University of Saskatchewan.
Because the board is part of a broad industry that includes farmers,
grain handlers and railways, a wide range of factors can affect returns
to farmers.
“You’ll never get a perfect measure of the wheat board performance
because they are part of an industry,” he said.
The methodology developed by Gray and adopted by the board attempts to
deal with that by providing three separate performance measures:
- A direct comparison of the CWB street price (the final pool return)
to an estimate of the U.S. market price at three comparable locations
in each country.
- A comparison of the port basis paid by farmers on each side of the
border. This will include such things as farm-to-elevator trucking
costs, freight and handling charges, demurrage and despatch, trucking
premiums, dockage and administration.
- An “overall performance” benchmark, comparing the realized CWB net
port price to an estimated non-CWB port price.
The board will generate a new set of numbers each year in order to
track whether the board is getting the best possible price for farmers.
The information will also be used internally in assessing the
performance of sales staff.
A monthly “logistics report” will also be published tracking changes in
basis charges in Canada and the U.S., along with other comparative
grain handling and shipping statistics.
While the numbers generated by benchmarking will undoubtedly become
ammunition in the ongoing debate about single desk selling, Gray said
he hopes they also lead to improvements in the system.
“This may prompt a discussion about all sorts of things that could be
done better,” he said, not only by the board but also by others. “For
example, reporting that dockage number may get people to focus on it
and do something about it.”
During the development of the benchmarking system, some farm groups
suggested other ways to compare the Canadian and U.S. marketing systems.
One proposal was to make the wheat board voluntary and then compare
returns between those who use the board and those who don’t.
The other was to set up an experiment in which two groups of similar
farmers would be selected, with one group selling wheat directly to the
U.S. and the other selling through the CWB. Their average per tonne
return would be compared at the end of the study. However Gray rejected
both suggestions. Making the board voluntary means it would no longer
be a single desk seller, making any comparison invalid. In the proposed
experiment, producers and marketers in each group would have an
incentive to adjust their usual business practices to make their
results look better.
