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Wheat board evaluation expected

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Published: February 28, 2002

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.

About the author

Adrian Ewins

Saskatoon newsroom

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