“We want information.
(You won’t get it!)
By hook or by crook, we will.”
Number Two talking to Number One in The Prisoner
Free markets rely on good information being widely disseminated. Vested interests like to keep vital information concealed.
So it’s in the interest of weak players in the market – farmers, small grain companies, small grain merchants, small processors, consumers – for there to be lots of information about what’s going on in the market so that everyone can assess prices, supply and demand, the real situation out there.
And because that’s a public good, it generally needs to be done by the government, and it is. And because the information provided is absolutely essential to the proper functioning of a “free” market, one would expect a conservative government to support it.
Unfortunately, Canada has worse ag stats, surveillance and reporting than the U.S. And what we have is a mishmash. Statistics Canada provides some reports – some of them very good. Agriculture Canada provides other reports and analysis, and again some are good. And each provincial government, mostly through their agriculture departments, release various reports and collect and collate certain stats. But in most areas, Canada is far surpassed by the work of the U.S. Department of Agriculture. Personally, I find the USDA intimidating, because there’s so much stuff within its websites that finding stuff often perplexes me. I occasionally pester my Markets section editor, D’arce McMillan, and analysts I’m interviewing to tell me “Where the f*&%k is that stuff?!?” But the fact that it’s there is nice. If only I could learn to find it.
We have far less info about crop progress and likely production than the U.S., and much worse information on prices. That creates problems for analysts who want to assess Canadian production and Canadian markets. I talked to Chuck Penner of LeftField Commodity Research about this and he spends lots of time trying to integrate crop reports from Alberta, Saskatchewan and Manitoba to produce a unified view of prairie production, but the reports are dog’s breakfasts, with different frequencies, areas of study, level of reporting. So he, like other analysts, is left to “extrapolate” a lot. That means “guess” a bunch. Prices he often can’t get from buyers, and the government doesn’t force reporting.
This is obviously bad for the market, and for farmers. The big grain companies have a really good sense of what’s going on out in the field, what’s in store in elevators, with their customers, at port, and going out in upcoming sales. But they can’t be expected to want to share that info, because it gives them an edge. Unfortunately that edge extends to their power over farmers when it comes to pricing.
Ten days ago I was in Minneapolis and I got the chance to visit the Minneapolis Grain Exchange again. (I try to pop by every year when I’m on my trip down to the World Pork Expo in Des Moines.) This time I visited the Trading Room at the exchange, which still hosts a couple of dozen options traders and has space for cash market commercial traders to meet and discuss physical grain supplies and stocks. All around the MGEX are futures trading firms, one of which – Frontier Futures – I visited and met with. And right there on the edge of the trading floor is a USDA official whose job is to collect and transmit various spring wheat market prices so that analysts, traders, commercial users and farmers know what’s going on in the market, at least in a limited way.
I’ve got a couple of features in this week’s paper (out tomorrow) so I won’t repeat everything I wrote there. But it struck me how much hard red spring wheat futures specialists like Austin Damiani and Scott O’Donnell of Frontier are concerned about the lack of good information about spring wheat in Canada. With much of the North American crop produced north of the 39th parallel, and it now being an open market, the interaction of the Canadian and U.S. crops should lead to a much better price discovery mechanism in the Minneapolis futures contract, and that should lead to a growth of that contract. But that relies on good information being available, and they’re having to rely upon the same mishmash of stats that Canadian analysts like Penner use. They’re hoping Canada can improve its stats-collecting.
And so should you, the farmer. Because without that information, you’re subject to vested interests using their market power against you.
You’d think a conservative government, like our present federal government, would be open to improving ag stats collection since it helps develop and preserve a well-functioning free market. But the government is in cutback mode, has already reduced some ag stats and info collection such as vessel lineups at port, so it’s probably too optimistic to expect the government to invest lots more money in improving the situation.
But the government does have the power to force companies to comply with orders to reveal prices at key points – as is available in the U.S. – and with today’s technology it isn’t too hard to collect and publish that information. This can be done with regulations and computers. And perhaps there could be a role for the new cereals grain commissions and bodies that are popping up across the Prairies to help gather, analyze, publish or publicize information produced by governments and other sources. Perhaps there are non-government ways to produce these vital numbers we lack.
This week I’m calling various farmer groups to see what they think of the Canadian ag stats and information situation and see if it reflects what analysts (and I) think. Not sure what I’ll discover.
But we’re pretty used to crappy market and production info up here in Canada, so hopefully the new open market in prairie grains will provoke farmers to look at the situation again and demand improvements. We could do better, and it wouldn’t necessarily be that hard.