RECENT shakeups in the pulse industry have given farmers and the
industry reason for caution.
In the past four months three major players in the business have been
forced to close for economic reasons – Agritrans, Cancom and Naber
Seeds.
Some have blamed problems, at least partially, on overbuilding in the
sector. They say too many small players created instability in the
industry and sullied Canada’s reputation as a reliable supplier. Others
disagree, saying there is plenty of business to go around in average
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Crop insurance’s ability to help producers has its limitations
Farmers enrolled in crop insurance can do just as well financially when they have a horrible crop or no crop at all, compared to when they have a below average crop
crop years, but not when the crops fall below average.
Whatever the post-mortem report, the closures raise interesting debates
about healthy competition versus efficiencies through rationalization,
and how to protect farmers who deliver to pulse crops buyers.
The latest case, involving Naber Seeds, also raises questions about the
value of the Canadian Grain Commission bond. Naber went under owing
farmers more than the value of its bond. Although some of that debt is
covered under other bankruptcy laws, or is for crops not covered by the
bond, many who thought they were covered will never be paid what is
owed them.
Perhaps it is time pulse growers revisited an old idea. In 1998, some
pulse growers were calling for a self-funded insurance plan but it
didn’t proceed because of inadequate interest. It may find a more
receptive audience today.
The closures should also prompt farmers to reconsider another risk
management tool. The pea contract flounders almost unused on the
Winnipeg Commodity Exchange. When well supported by an industry,
futures contracts provide a good hedge against unexpected price
fluctuations, adding stability to the marketplace.
The last four months have left farmers with fewer choices when it comes
to marketing their crops. Many will have to travel farther to deliver,
or will deliver from necessity to the lone grain company in their area.
This after being told for years that they must diversify into crops
like pulses to avoid the risks of over-reliance on cereals. Many
farmers have also invested in locally owned pulse crops facilities. As
centralization looms, it seems another blow to farmer initiative and
independence.
But rationalization is not all bad. It has potential to weed out less
reliable companies. If the companies left standing, including some
smaller ones, provide what farmers need, it could prove better for all.
If the surviving pulse crops companies offer efficient service and act
as more than middlemen between buyers and farmers, there is promise for
building a more vibrant pulse industry. These survivors must have first
rate market intelligence with international contacts and offices
abroad. They must not only sell, but promote Canadian pulses worldwide.
Then the industry will be able to move into the mainstream.
