CWB a more flexible version of old model

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This article was published 30/03/2012 (4014 days ago), so information in it may no longer be current.

THE Canadian Wheat Board has unveiled its strategy for attracting farm customers and surviving in a post-monopoly world, and industry officials predicted Thursday most producers will keep an open mind when deciding if they like what they see.

“There will be some guys who will say, ‘No way, I’m not dealing with them,’ ” said Rolf Penner, Manitoba vice-president of the Western Canadian Wheat Growers Association, which lobbied hard for an open-market system.

“But I think the vast majority will take an honest look at their programs… to see if they offer value. And if they offer value, they’ll take it,” he said. “I’m certainly going to look at it.”

The new version of the CWB is a familiar but more flexible version of the old one, which enjoyed a 60-plus-year monopoly on the marketing of Canadian-grown wheat and barley.

Like the old one, the new-look CWB will offer farmers price-pooling options and cash contracts. Except there will be two pool options instead of one, and the cash contracts will be more flexible than the old ones. Growers also will have the option of marketing some of their grain themselves and some through the CWB, letting the board handle it all or bypassing the board altogether and selling directly to grain companies or other buyers.

That kind of marketing freedom is what the Harper government was seeking when it passed legislation late last year doing away with the board’s monopoly and creating an open market for wheat and barley. The new open-market system comes into effect at the start of the next crop year on Aug. 1.

Board officials and their supporters initially expressed fears the agency wouldn’t be able to compete against the grain companies because it doesn’t own any grain elevators or port facilities.

But CWB president and CEO Ian White was singing a different tune on Thursday, saying board officials are now confident it will survive because the federal government has since agreed to guarantee its loans and its cash payments. And the grain companies are eager to handle any grain it has to market on behalf of farmers.

“They need volume,” White said, and they anticipate the CWB will still be marketing significant volumes of Prairie grain.

“And they want to handle that volume,” he said.

Keystone Agriculture Producers president Doug Chorney said a lot of farmers like using pooling and cash contracts, and they’ll like the board’s new products even more because they’re more flexible than the old ones.

Although farmers can start signing up for the new CWB programs immediately, they won’t take effect until the new crop year begins.

Chorney said farmers will be watching closely to make sure the CWB reaches grain handling agreements with all of the major grain companies — something White said is in the works.

“That’s what we were hoping to hear,” Chorney said.

The board signed one such deal with Cargill earlier this month, and White said Thursday it also has one with the South West Terminal near Gull Lake.

White said there’s no question the new CWB won’t be marketing as much grain as the old CWB, so it won’t need as many employees. He said it has already eliminated 50 positions in the past three months from its Winnipeg head office, leaving about 340. There will be more cuts to come, he said, although he wouldn’t speculate on how many.

“As we go through the next six months or so, we’ll be tuning that staff complement to meet the needs of what the future environment looks like, and obviously that will be a smaller complement of staff than we have today.”

He said the size of the staff will be determined to a large extent by the volume of work it gets from Prairie farmers.

The move to an open-market system split the Prairie farming community, with some believing grain prices will drop as producers compete against each other for sales. Others believe they can get high prices on the open market and deserve the right to try.

Eight former directors of the wheat board, who were elected by farmers, tried unsuccessfully to have a court overturn the federal law.

White said the board continues to be the only option for producers who want the security of price pools.

— With files by The Canadian Press

murray.mcneill@freepress.mb.ca

CWB, version 2.0, unveils strategy

Here is a summary of the new CWB programs unveiled on Thursday:

Price pools: Pooling is a time-tested strategy for risk management, ensuring farmers are never forced to take prices from the bottom of the market, or left chasing an elusive market high. Instead, it returns the average received from all markets across the entire pooling period, meaning farmers keep all of the profits from their grain sales and share in any price rallies that occur after they sign a contract. Sign-up began Thursday.

Harvest pool: Runs from Aug. 1 to July 31 of each crop year. Sign-up ends Oct. 31. Twelve reference grades for Canada Western Red Spring wheat, five reference grades for durum, plus Canada Prairie Spring Red wheat, Canada Western Red Winter wheat and two-row malting barley. Delivery is guaranteed by July 31. Can be signed directly with the CWB, with grain handler chosen later.

Early delivery pool: Runs from Aug. 1 to Jan. 31. Sign-up ends Sept. 28. Delivery is guaranteed by Jan. 31. Same grades as above. Can be signed directly with the CWB, or with grain handler chosen later.

Cash contracts: Cash contracts can be used in combination with price pooling to build a complete marketing strategy, tailored to suit farmers’ individual risk and financial objectives. A wide range of reference grades are offered. Target pricing is also available. Sign-up begins March 29.

Deferred-delivery contract: Provides upfront price certainty. Farmers lock in a flat price and reference grade, then negotiate a delivery date with their grain handler.

Futures-first contract: Fixes a futures-based value derived from farmers’ choice of grain futures exchange and maturity, with basis and reference grade locked in later. Farmers negotiate their delivery period, pay no brokerage fees and have no margin calls. Futures can be locked in directly with the CWB.

Basis-first contract: Fixes a basis and reference grade, with a futures-based value locked in later. The basis is fixed through their grain handler. Farmers negotiate their delivery period, pay no brokerage fees and have no margin calls.

Real-time pricing: Farmers can find real-time price indicators from the CWB’s website or by calling the CWB, with values that change daily between 9:30 a.m. and 1:15 p.m. as markets fluctuate. An online tool has been developed to make it easy for farmers to follow CWB prices.

Malting barley production contracts: A production contract guarantees a market for a farmer’s malting barley, even before seeding or harvest. It provides assured access to the CWB malting barley pools, plus the option to switch to a cash contract. These contracts are available for two-row malting barley.

— Source: Canadian Wheat Board