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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
[email protected]

-30- 

About the author

Field Editor

Lee Hart

Lee Hart is editor of Cattleman’s Corner based in Calgary.

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