To the Editor:
In a recent letter to the editor, Kyle Korneychuk (WP, March 31) is critical of my position about whether port prices should be made public or not. He says farmers need to know port prices so they can compare them to their local elevator prices to see how badly grain companies are gouging them.
The whole grain industry (not just farmers) benefits from greater transparency. But comparing the current elevator bids to the current port price cannot be used to conclude how much grain companies are making (or gouging).
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Grain is bought and sold every day but you can’t conclude that on any given day, a grain company sells at the port the same amount they buy at the elevator. In fact, the grain being bought today may satisfy sales made weeks or months ago at a very different price than today.
Korneychuk appears to want grain companies to report actual sales prices. If they did, what if one company had made very high priced sales months ago. And, now that they are buying to satisfy those sales, they have the largest “export basis” (his term, not mine). Korneychuk would say that they are gouging. But what if, even with a large “export basis,” this company has the best price to farmers? Still gouging?
Does Korneychuk avoid selling to the company with the largest export basis (biggest gouger), even though it has the best price? Or does he sell to the company with the lowest export basis (smallest gouger), even though they are paying less?
The “export basis” has less to do with gouging and more to do with capacity and the demand for that capacity.
Korneychuk appears to support using this information to pressure policy makers to regulate the grain system. I disagree.
The best way to use this information is for farmers to use it as a market signal and respond accordingly. This doesn’t happen as much as it should or could.
Korneychuk and I agree that the market will benefit from improved price transparency. We don’t agree on what information is reasonable and what to do with it. I encourage Korneychuk to contribute to efforts to empower farmers to respond better to market signals through the development of better tools and techniques for farmers.
