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Open-market supporters are gloating -- for now

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There were bound to be "I told you so's" flying around the Prairies no matter how things went this fall, as farmers started delivering wheat and barley into the open market for the first time in 69 years.

As it is, the open-market supporters are free to gloat. The first three months of the crop year have seen a record 14 million tonnes delivered into the handling system at cash prices farmers could only dream about just a few short years ago.

Had it gone the other way, the single-desk supporters would have delighted in saying, "See, I told you."

Farmers' biggest problem this year might be deciding how to avoid paying all that income tax now they don't have to spread their sales out over 12 months like they did under the former pooling system.

It must be noted, however, that farmers were blessed with an early, dry harvest and cereal crops that are above average in both yield and quality. Prices so far have been high due to poor crops elsewhere, not changes to the Canadian Wheat Board. It's entirely possible performance would have been equally stellar under the single desk.

But that's beside the point. Conditions this fall have given the grain-handling system a near-perfect opportunity to make a smooth transition to the new marketing environment. This also gives the sector time to prepare for the inevitable return of less-than-ideal conditions -- weather-damaged grades that are hard to store and even tougher to blend and sell.

Even the veterans of the grain trade are warning the honeymoon will end. After all, only one-fifth of the crop has been marketed to date.

Unlike other major grain-exporting countries that are well-endowed with commercial grain storage close to port, Canada's grain-handling system is more like a pipeline that draws grain forward from on-farm storage to port as it is needed.

This means in order for the Canadian just-in-time logistics to function smoothly, farmers must steadily feed into the pipeline 12 months of the year, whether it's fine weather or -40 C or spring seeding time.

While it's too soon to write it off, the outlook isn't quite as peachy for the voluntary pooling system under the new CWB; officials have acknowledged it is suffering from lower-than-hoped-for interest. This was to be expected, as voluntary pools have historically suffered from low producer interest when prices are high and grain is flowing smoothly. Nor is the CWB likely to be competitive with its cash purchases, as it is bidding against the same companies it depends upon for moving its grain.

That said, it is no longer limited to selling cereals, and last week it made its first-ever canola sale.

It also doesn't look good for the newly launched ICE Futures Canada contracts, for which open interest remains slim to non-existent. No surprises there either.

Many farmers remain bitter over how the change came about. Farmers attending the recent National Farmers Union convention in Saskatoon refuse to believe the old CWB is history. They hope the Supreme Court of Canada agrees to hear an appeal, then rules the federal government must reinstate the monopoly because it overstepped its authority by killing the single desk without holding a farmer vote.

Equally unrealistic is the suggestion that farmers now suffer from the same lack of market power they faced a century ago and the government needs to step up with regulations to protect them.

That sounds like something the NFU would say; its members would agree wholeheartedly. But this observation is actually coming from the other side -- vociferous single-desk opponents Paul Earl, an agricultural economist at the University of Manitoba, and John De Pape, an industry marketing consultant and blogger. They told a recent grain-industry conference that while the single desk was bad and had to go, which effectively neuters the CWB's ability to stand up for farmers, farmers need a united voice and regulations to fill the gap.

Good luck with that. The federal government appears more interested in splintering the farm voice than uniting it, and deregulating rather than re-regulating, as evidenced by the absence of the long-awaited legislation to give rail shippers negotiating power with the railways.

The open market is here, and the sun still rises. Whether farmers have lost something valuable, and whether they will recognize it if they have, is now something for historians to decide.

 

Laura Rance is editor of the Manitoba Co-operator. She can be reached at 204-792-4382 or by email: laura@fbcpublishing.com

Republished from the Winnipeg Free Press print edition December 8, 2012 B7

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