Further reflection on the CWB future

Nothing bugs me more than when facts and a good counter-argument conflict with or confuse my views. Does that spoil a party or what?

I’m not saying that after now reading Allen Oberg’s speech on what’s ahead for the Canadian Wheat Board reverses my thoughts from a couple days ago (i.e. June 20 blog – Canadian Wheat Board needs to realize the tribe has spoken), but it does give me cause to think further. Maureen Fitzhenry, communications manager for the CWB suggested that if I actually read the speech I might be better informed.

The whole speech can be found on the CWB website or by clicking this link:

http://www.cwb.ca/public/en/newsroom/releases/2011/news_release.jsp?news=061611.jsp#speech

And following are some important statements by Oberg, within that speech:

“Removing the CWB's single desk structure affects farmers more than anyone else. And the repercussions will be huge.

That is a fact. Let's look at some more facts.

            Fact: The CWB is the single desk. It is a marketing structure. Its whole premise... its whole value proposition... is built upon the concept that farmers benefit from marketing our grain together, as one.

            Fact: Since the CWB is a marketing structure for farmers - not a grain company -- it has no assets. Under the CWB Act, it is not allowed to own real assets. It has no grain-handling infrastructure, no capital base for borrowing money or financing its operations. It exists by virtue of legislation and by the existence of government financial guarantees.

            Fact: If the CWB were to continue its grain-marketing role in an open market, it would need to operate as a grain company. A grain company that would need to rely on competing grain companies in order to carry out its business. Companies like Viterra, Cargill, Richardson, right now, are service providers or agents to the CWB. In an open market, they become its competitors. And the CWB becomes the new kid on the block... . a rather small kid, I might add - provided it obtains any assets at all. You don't need to be an agricultural economist to see how this would play out in the long term.

Let me put this another way: It is August 1, 2012. You want to deliver grain to the CWB. How will you do it? You will drive to your local elevator, which is now competing with the CWB. This elevator is run by a company with no incentive and no requirement to handle CWB grain. You won't be able to deliver it to the CWB directly, because it has no facilities.

Those are some of the realities. Now, let's look at some of the myths.

            Myth number one: "If the CWB is so good at what it does, it could compete and survive."

I hear that one a lot. I hope you can see from the facts I've just shared, that this comment doesn't make much sense. It's not a matter of being good at your job. If you have no assets and no facilities... if you are reliant on your competitors to stay in business... you're not going to survive.

            Myth number two: "Farmers who support the CWB would stay with the CWB."

I assume this refers to participation in a voluntary pooling system. I don't know about you, but I'm in the business of farming to make money. I believe the pools make me the most money over the long term. That's why I like them. But I also know that pools don't work very well on a voluntary basis. Pools needs to have reasonable certainty that they can source the grain needed to fulfill the sales contracts they make. And, when markets are rising, not all farmers are going to put their commitment to the pool ahead of taking a higher immediate spot price. That makes risk-management tricky.

            Myth number three: "If a voluntary CWB doesn't work, it's because the CWB itself has refused to change."

That one is a nifty turn of the tables.

Let me first remind you that the CWB is the single desk. There is a law - at least for now - that requires the CWB be structured as a single desk and that its staff carry out their duties under that mandate. There is a board of directors who govern the CWB, mainly comprised of elected farmers like me, who believe in the merits of the single desk.

For these reasons the CWB must conduct its business as a single desk and support the single desk. But it does not have its head in the sand. There have been huge changes in recent years, particularly when farmers took over its governance in 1999. The Wheat Board of today would be barely recognizable to the farmers of 1943...or even to those of 1996, for that matter.”

Okay, so now I have read that and will think on it.  But, at the same time I can flip over to another website where Brenda Tjaden Lepp, a long-time Winnipeg-based grain marketer and policy analyst with a master’s degree in agriculture economics also had posted some thoughts on the CWB future. Lepp is co-founder and chief analysts of FarmLink Marketing Solutions (www.farmlinksolutions.ca ). Here in part are her thoughts:

Q: What will we do now? 
A: “Don’t be scared. It’s actually not that hard or complicated. FarmLink has four analysts with lots of trading experience, and a combined deep understanding of all the relevant forces impacting wheat, durum and barley marketing decisions. We’re not worried about it; in fact, we’re expecting a lot less paperwork and clearer price signals, making it easier to make smart marketing decisions.”


Q: We’re losing such a valuable resource. A: 
“Yes, but only on three crops. The costs of marketing the others in your crop mix have been yours to bear and yours to manage all along. No, private companies such as consultants, grain handlers and brokers aren’t free, but neither was the work the CWB did.”


Q: What will become of the CWB without its monopoly? A: 
“Farmers need to communicate, to the CWB and to government, what about the organization has value, and what help they need in marketing crops in the future:
1. Trade advocacy and market development efforts, similar to Pulse Canada or the Canola Council.
2. Hands-on assistance and/or a trusted third party to help with the hard work of marketing grain.
3. An alternative to marketing through multinational grain companies. It will take a lot of work and creativity, but the CWB is in a good position to offer this in a post-monopoly environment.”

Okay, so now I have read that, too, and will think on it. Granted an underlying motive of Lepp’s comments maybe to draw more clients to her prairie wide grain marketing services. FarmLink and other marketing companies are all there to help lead producers across the post-monopoly desert. But at the same time she makes the point, while things may or will change — it will be different — but grain will get marketed after August 2012.

I am fearing now that the discussion/debate over what role the CWB will play in an open marketing structure may be as polarized as the debate over whether there should be an open market in the first place.

With a bit of time I could sort this all out, but I just had a call from the United Nations and they want me to come up with a sure fire solution for world peace, so I will be working on that this week. It’s easier and it pays better too.

Lee Hart is a field editor for Grainews in Calgary, Contact him at 403-592-1964 or by email at lee@fbcpublishing.com

-30-