The CWB program will no doubt need some adjustments over the coming months and years, but farmers like what they see so far
The new CWB may not be perfect, but Western Canadian farmers contacted for this Farmer Panel generally like what they see in the agency that becomes one more grain marketing company in a new open marketplace on August 1, 2012.
As one farmer pointed out, the change that has taken place over the past year was an end to the wheat and barley marketing monopoly held by the Canadian Wheat Board for 70 years — it wasn’t the end of the Board.
As of mid-July, farmers in this panel had not committed or pre-booked any of their crops with the new CWB — although all said “not yet” — and any delay was not due to fears about the effectiveness of the board to market the crop, but more about each farm’s marketing program. All said CWB contracts and pooling programs would be seriously considered in the coming weeks. Some farmers noted they had wheat and barley back in rotation for the first time in several years.
Panel members from the drier/hot regions of southeast Manitoba, across long-time water logged fields of Saskatchewan, to the usually dry southern Alberta, all report decent to above average looking crops at this time of year. Combines might be rolling in some parts of Manitoba by late July or early August — a couple of weeks ahead of normal. Mother Nature needed to produce some timely rains, and hold the hail, but all things being equal prospects for harvest were looking good.
Here is what this Farmer Panel had to say about the role of the new CWB in their 2012-13 marketing plans:
Kendall Heise Isabella, Man.
Kendall Heise thought there might actually be more confusion in the transition from a wheat and barley marketing monopoly to an open market system, but in his view it has all gone fairly smoothly.
“In the midst of the transition I wasn’t sure how things were going to turn out, but really I have been pleasantly surprised,” says Heise, who crops about 2,300 acres at Isabella, north of Virden, Man. “There are lots of contracting opportunities out there — the Board has their own contracts — so I think it has gone quite well. We will have to see how the whole process works as we get into fall and winter. The proof will be in the pudding — but at this point, I am impressed at how well it has gone.”
Heise says he didn’t have any real issues with the old Canadian Wheat Board, but he does like the idea of having marketing choice. “At one point I was afraid the Board might not survive into the new system, but I am glad it has,” he says. “And the CWB should have good support as 50 per cent of farmers favored the monopoly, so many of the contracts and the pooling system they favored are still there.”
Heise is producing feed wheat (contracted for ethanol production), winter wheat, hard red spring wheat (for seed), canola, flax and fall rye this year. He has already done some contracting with the flax, canola, rye, and feed wheat and will look at contracting more of his crop in the coming weeks.
“I have been a bit uncertain about the markets, but with this really strong weather market in the U.S., I don’t want to sit on my hands too long,” he says. “So I will be looking at my options over the next couple weeks.”
He says although growing conditions were getting a bit dry as of July 12, generally crops in his area looked “amazing… I don’t think there is a poor crop in the area. The winter wheat and fall rye is already beginning to turn so I expect harvest will get underway by end of July or early August.”
Art Enns Morris, Man.
Art Enns says he expects there will be a “learning curve” as the new open-market CWB goes into full operation in August.
Enns who farms in the Red River Valley, near Morris, Man. says he feels farmers and grain companies are adapting well to the new open market player.
“Producers as well as grain companies are learning the new system and it may take a couple years to sort out the details,” he says. “We have the changes to the CWB — the open market — and we have the prospect of prices rising to at or near record levels with the U.S. weather market, so there are a few new issues both farmers and grain companies are dealing with.”
Enns, who has wheat back in rotation for the first time in several years, says what has surprised him in the lead up to the open market, is the interest from U.S. grain companies.
“Where we farm we are only about 20 miles north of the border with North Dakota, and there are a lot of livestock operations in this area, and a lot of corn and soybean meal being hauled in from the U.S.,” he says. “Trucks are coming here loaded and they are looking for loads to haul back.
“I have been surprised by the number of U.S. companies looking to buy grain in this area, provided it meets their specs. So I think dealing with that is another issue, and another learning curve for producers. And it brings in more competition for this grain which our companies will have to respond to.”
Enns is growing hard red spring wheat, some oats, and a good-sized soybean and canola crop this year. He hasn’t contracted any wheat to the CWB yet, but says he will consider their program. While the CWB may be a bit late in negotiating handling agreements with established grain companies, he realizes “these are huge agreements and world business takes times — it is not unusual.”
For his own operation, he hasn’t forward priced wheat, as he is waiting to learn both the quantity and quality of his crop.
“It is hard to do a lot of pre-selling until you know what you have for protein and grade,” he says. “And I don’t think the grain companies are sure what do either. Some are basing their prices on No. 1, 13.5 per cent protein wheat, and others are basing it on No. 2, 12.5 per cent protein. With price differences in grades and proteins, wheat is different to market than say oats or canola or other commodities. Depending on the year price premiums for protein can be quite narrow or they can be 50 or 60 cents a bushel which is significant.”
Overall he says the new open market system with the CWB is positive and it will take time for all players to learn how the system works. “But I think both farmers are grain companies are working together to make it work,” he says.
Marcel Van Staveren Griffin, Sask.
While Marcel van Staveren, is glad to have the open market choice in 2012 he is not sure if he will use CWB services this year as he sorts out the best cereals for the rotation on his southern Saskatchewan farm.
Van Staveren, who along with family members crops about 14,000 acres near Griffin, says traditionally he has had good success in producing high quality durum. But in the last few years, despite high quality durum, the market is paying more for hard red spring wheat.
“We have good success with durum,” he says. “Traditionally our yields are never less and usually better than average. Myself, like a lot of growers remember a few years ago when durum through the Canadian Wheat Board was selling for $13 a bushel. But it appears now, as global markets change that spring wheat is producing a better return. So perhaps we should be looking grow these mid-grade wheats, that produce higher yields, for a better return.”
Van Staveren doesn’t like to pre-price durum until he knows the quality of the crop. “It is much like malt barley, you need the proper quality,” he says. “And for a number of reasons, whether it be ergot or whatever, you are never really sure of what you have until it is in the bin. So I have been cautious to forward price for that reason.”
After a disastrous year in 2011, when he was only able to seed about two per cent of his land due to excessive moisture, he is glad to see an exceptional crop growing in 2012. His rotation this year includes, durum, canola, his first-ever soybean crop, flax, and some winter wheat. He has pre-priced about 40 per cent of his canola crop, and about 50 per cent of the winter wheat has been contracted to an ethanol plant.
With soybeans looking exceptional this year, and durum prices lagging behind, he may be adjusting his rotation to grow more soybeans or even other pulse crops such as peas and lentils.
Brian Otto Warner, Alta.
Southern Alberta farmer, Brian Otto, a long-time advocate of an open market, says he is pleased to see the new CWB develop a good network of delivery points for farmers delivering grain to the board, and he expects more will come.
“They have agreements with Viterra and Cargill and several other companies now (mid July) which gives farmers good access to the CWB,” says Otto, who farms at Warner, south of Lethbridge. “And I think that is a very key thing in attracting farmers to use the CWB — having someplace relatively close to deliver your grain.
“And I have to give credit to Ian White (CWB president) and his staff for developing a business model that works for farmers.”
Otto is also pleased to see the CWB had recently increased its initial payments for farmers using its pooling account, to reflect the changing market. “This is a very good thing as they are responsive to the market, which is something I felt the monopoly should have been doing too,” says Otto. “The CWB has a variety of marketing programs and contracts as well as pooling, and I think it shows they are listening to and responding to farmers needs — they are on the right track.”
Otto says he hasn’t used any of the CWB contracts yet, but will seriously consider it in his marketing program.
“I have done some forward pricing already, which is something I have done for years,” he says. “I haven’t used the CWB to date and that’s mainly because when I did my pricing the CWB didn’t have its programs in place. But I will be looking at their marketing options.
“I am certainly not opposed to using the CWB. If they can offer an attractive price that is competitive I will use their services. I will deal with any one if it is a good business decision for my farm.”
Otto says the structure of the new CWB is what he anticipated, but expects more changes will come. “I think what we see now is a very good starting point, but no body gets anything perfect the first time out,” he says. “I think as we move forward in this open market there will be some adjustments to their programs as they change to meet the needs of farmers as well as their customers, but it is a good start.”
Richard Nordstrom Viking, Alta.
Retired farmer Richard Nordstrom says he hopes one of the indirect benefits of the new open market is an incentive to get more farmers growing wheat and barley and get back to proper crop rotations.
“There is an awful lot of canola out there, and I am just concerned there could be a real disaster coming for canola as farmers push these rotations,” says Nordstrom, who now rents his farm near Viking, east of Edmonton, to a couple of progressive young farmers. “I know the boys who rent here have barley back in the rotation this year, and I think we need to see more grains as a good economic option to bring proper crop rotations back.”
Nordstrom who has long been involved with industry associations, such as the Western Barley Growers and still is a member of the Western Grains Standards Committee, gives Ian White, CWB president, credit for persevering during a difficult transition period.
“I was really nervous there for a while as I looked at the fight that the other side (monopoly supporters) were putting up and they were really hindering the transition process,” he says. “I have to give Ian White credit for his patience during that whole process, as an ordinary guy might have left due to the frustration. But now we are starting to see an open market system that is allowing farms to run the way they should be run. And I believe even the long time monopoly supporters are seeing there can be an open market system that works for them too.
“And critics and the media didn’t help the process either because they kept saying it was the end of the Canadian Wheat Board. Well this whole process was about the end of the monopoly system, it wasn’t about the end of the Board.” †