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Dawn of a new reality for CWB

Monopoly ends as farmers eye options to sell this year's crop

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At the end of June, western Canadian farmers numbering in the thousands dialed in to a teleconference where Ian White, CEO of the Canadian Wheat Board, answered questions and told producers how the new CWB would benefit their operations.

With the start of the new crop year -- officially next Wednesday, Aug. 1 -- western grain farmers can start selling their wheat and barley production to anyone they choose.

Now the wheat board will have to compete with other grain handlers to accumulate milling wheat, durum and malting barley to sell to end users. For the past 75 years, it was its legislated right and responsibilty to handle 100 per cent of production from about 70,000 farmers across the Prairies.

Participants in a straw poll taken during the 75-minute conference call indicated about 80 per cent of them would sell at least a portion of their harvest to the CWB.

But the future success of the Canadian Wheat Board -- which will soon unveil a new logo and rebrand as the "CWB" -- is far from guaranteed, even with its recently announced $349-million backstop from the federal government.

White said he believes by leveraging its producer relationships and its solid track record with buyers around the world, including customers in such prickly locales as Sri Lanka, Indonesia, Bangladesh, Saudi Arabia and China, the new wheat board can be viable.

It has recently come out with a number of pool and cash options for milling wheat, malting barley and feed barley and has indicated that in a couple of weeks it will launch a canola pool and will likely enter the peas and lentil market before long.

It will have the only price-averaging pool options on the market, a feature that guarantees farmers will get a price that averages out the highs and lows of a volatile market.

The question is, can an organization Sylvain Charlebois, an agri-food marketing expert at the University of Guelph, argues had succumbed to "bureaucratic arrogance" manage the three-ring circus of farmers, grain-handling companies and end-user customers?

Charlebois said he's always been a wheat board supporter, but never a supporter of the monopoly. He said he believes the CWB will become more efficient and the western farm economy will thrive as a result of the end of the monopoly.

"When you maintain a monopoly for 75 years, you are bound to be complacent and not try to be a better service provider," Charlebois said.

Notwithstanding this week's announcement former wheat board directors will seek leave to appeal to the Supreme Court of Canada to continue arguing Ottawa should have held a farmer vote prior to legislation that ended the wheat board's monopoly, the time for rhetoric is over.

Harvest time is about to begin and a mammoth crop will need to be marketed.

"I see the CWB with a role to play if they take advantage of the situation," said Sean Gatin, vice-president of Agri-Trend Marketing Inc. "They have as good a chance as any company. They are missing physical assets, so they need to overcome that with relationships with the grain companies. They need to maintain the farmer relationships to convince them to stay with the wheat board. They need to show value by making good, timely sales to foreign countries. And they need to make it worth their while for grain companies to support them."

It's a daunting challenge and one the CWB really only had seven months for which to prepare.

"The date (Aug. 1) from our perspective will come and go," White said in a recent interview. "We have streamlined the business and got ourselves into the new mode. We have been contracting and operating in the new environment just like all the other companies in the grain trade have been doing now for some time."

White said the expectation is the CWB will handle 35 to 40 per cent of this year's wheat and barley crop.

No one has a good handle on farmers' intentions, notorious as they are about not wanting to commit until their crop is in the bins.

"I'm not going to predict how much of the crop they'll get," Gatin said. "Some say it's the smaller farmers who need the CWB. I would postulate something different. Supporters of the CWB, or even semi-non-supporters, might look to do a portion of their crop with the CWB as opposed to going blindly into the night with 100 per cent of their crop."

The CWB has announced handling arrangements with most of the grain-handling companies (the most notable exception is Richardson International Ltd. with whom negotiations are still underway) and so technically CWB customers will have more delivery options than even the grain handlers' own customers have.

Doug Chorney, president of Keystone Agricultural Producers, said there are all sorts of factors at play that will determine whether the new CWB will work.

"If they are competitive and seen as a good option, they will get participation because farmers want to work with them," Chorney said. "But it will be a cat and mouse game. No question, it is going to be challenge to remain relevant in the open market."

Republished from the Winnipeg Free Press print edition July 28, 2012 B6

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