The Canadian Wheat Board believes it will be a significant player in the grain industry after Aug. 1.
Although details are still pending about specific agreements with grain handlers, CWB staff members and senior executives are presenting a refreshingly positive picture of how the organization will function after the single desk function is lost.
For years, single desk supporters have said that a CWB without its monopoly would be doomed. After all, it doesn’t own any grain handling facilities.
Now, the story coming from the CWB is that grain companies will want the volume that it can bring to the table. The grain companies are also competitors, but why would they pass up an opportunity to handle additional grain?
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The CWB has inherent advantages, including a government guarantee on borrowing, employees with marketing experience and direct relationships with customers around the world.
It appears that farmers signing up grain with the CWB will be able to choose between various pooling options and cash pricing. If handling agreements are successfully negotiated, farmers will also be able to choose which grain company to ship their CWB grain through.
It’s still tough to visualize exactly how this is all going to function, but if the CWB can remain a significant player, it will help bring competition to the marketplace.
So, how much of the wheat, durum and malting barley will the CWB get its hands on? Will it be less than 25 percent, over half of the total or somewhere in between? The viability of the organization will depend to a great extent on the volume it can garner.
While the CWB says it will be offering cash prices, officials are also playing up the pooling options that will be available. There could be a pre-harvest pool, a harvest pool and perhaps other pooling options.
There’s nothing stopping grain companies from offering competing pools, but the concept is certainly associated with how the CWB has always functioned. You see little or no pooling of canola, peas and lentils.
Personally, I’m not a fan of pooling. I want to know the price when I pull the trigger on a sale.
However, there are apparently lots of producers asking for pools.
It isn’t an all or nothing proposition. Individual producers will be able to choose a pool for some of their wheat and durum while selling the rest on the cash market. It seems likely, however, that the CWB’s success in the new world will hinge to a great extent on the popularity of price pooling.
Compared to the major grain companies, the CWB has been slow out of the gate for new crop price offerings. The first wheat and durum contracts were publicly signed in mid-December, right after Bill C-18 received royal assent.
There’s been a lot of discussion about the newfound freedom to forward contract, but after the initial flurry of business, the prices quickly tailed off. As well, the contracts don’t define the grade discounts, which has caused some producers to shy away.
Overall, a relatively minor amount of new crop tonnage has been signed up. The CWB still has an opportunity to impress farmers and grab a significant market share. It will be fascinating to see how it all plays out.
