Depending who you listen to, either the sky is going to fall on Aug. 1, 2012, or the sun is going to rise on a bright new future. We’ve all heard the arguments for and against the single desk and generally those arguments come with predictions of either doom or prosperity.
It won’t all be positive and it won’t all be negative. And there will be a lot of changes that observers haven’t considered.
Don’t expect a boom in secondary processing. Yes, Alliance Grain Traders at Regina has already announced a durum mill and pasta plant. And yes, Rahr Malting at Alix, Alta., has announced an expansion to its storage facilities.
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But the secondary processing game is highly competitive and food markets are mature. Any new or expanding ventures have to steal market share from someone else and they have to make the economics work.
A big expansion in secondary processing was forecast by those who wanted an end to the Crow Rate. A transportation subsidy for moving raw product out of the region was certainly a big negative for processing, but even without the subsidy we haven’t exactly become a secondary processing powerhouse.
There has been an impressive expansion in canola crushing on the Prairies, but it didn’t happen quickly and there were many other factors at play. The hog industry that was supposed to boom with access to landlocked feed grain has imploded.
The loss of the Canadian Wheat Board single desk could be a negative for the beef industry. Cattle producers tend to be free enterprise types, but having the CWB single desk has probably moderated the price of barley over the years.
The international market for feed barley is not always competitive with what barley is worth within Western Canada. There are years when little feed barley is sold out of the country.
Open market players should be more nimble in capturing offshore sales when opportunities arise. That is likely to support domestic feed barley prices. Feedlots that have to pay more for barley bid less for calves.
This effect may be counteracted by an increase in barley acreage along with increases in wheat and barley. Academics and analysts don’t agree on whether the CWB single desk delivers higher overall prices to producers, but there’s little doubt that producers will have more flexibility with an open market.
There will be more control over deliveries and cash flow and perhaps more ability to forward contract. Many producers who have long pushed for marketing freedom will respond to that freedom by upping their acres at the expense of other crops.
In durum, a big increase in acres will almost certainly lead to disappointing prices. Canada dominates the world export market for durum. With or without the single desk, we can overproduce and glut that market.
Expect changes in the grain handling system. There will be mergers and takeovers and new players in the market, but there should still be a place for the smaller players including farmer-owned elevators. Just look at the U.S. where there are lots of elevators owned by farmer co-ops.
We may see more companies and elevator points that specialize. Rathe r than buying everything from canola to wheat to peas, an elevator might deal exclusively in malting barley or a particular class of wheat.
We’re going to see a lot of changes, some good and some not, and some that no one anticipated.
Kevin Hursh is an agricultural journalist, consultant and farmer. He can be reached by e-mail at kevin@hursh.ca.
