Wednesday, April 6, 2011

Who wants the CWB to market canola?

The Manitoba Canola Growers Association just launched a producer survey that takes an interesting yet biased approach to the question of the CWB marketing canola.  The questions don’t allow you to just say “no thanks”.  Here are the questions:
  • Do you presently load producer cars?
  • Would you load producer cars of canola if they were available?
  • How many tonnes of canola do you produce annually?
  • How many tonnes of canola would you be interested in having the CWB market on your behalf?
Unfortunately, this survey is badly flawed – and not because of the way the questions were asked (although there are problems there as well).  The biggest problem is that anyone can respond (not just farmers) and you can respond as often as you like.  For example, you could go through your local phone book and submit a response in each person’s name.  Because of this alone the survey results will be totally worthless. (I’ve responded twice already; you just clear your computer cookies between each submission.)

But beyond that, the questions are really structured for those that like the idea of the CWB marketing canola in the first place.  After reading the questions, those that don’t support the idea may simply assume that the questions aren’t for them and not submit anything.  Take a look at the last question; it asks how many tonnes of canola you would like the CWB to market for you.  You could say “zero” but I think many will just not respond.  The risk is in the “results”; if the MCGA announces that the vast majority of those responding support the CWB’s involvement, it will be a serious misinterpretation and miscommunication.

Producer Cars

The questions are also about producer cars; specifically about loading canola producer cars.  It almost appears that the MCGA is drawing a connection between CWB involvement in canola marketing and opportunities to load canola producer cars.

Let’s look at this a little closer.  The reason why farmers load producer cars is financial. Loading a producer car you avoid about $13.00/tonne country elevation, or about $1,200 per car or more.  This is possible only because you are going around a portion of the high cost CWB system.  There isn’t the same gain on canola; according to data from the Federal Grain Monitor and Canadian Grain Commission, it appears that grain companies make their “handle” on terminal elevation and cleaning and make very little at the country elevator, no doubt due to stiff competition from local crushers.   There just isn’t the high country elevation to avoid like you see in wheat; I don’t know what a guy needs to make loading a producer car attractive, but I’m sure you won’t get it from canola – with or without the CWB. 

The value of canola marketing by the CWB

This opens the door to a discussion concerning the CWB’s value proposition to farmers and end-users.

  • First off, the MCGA question is regarding the CWB marketing canola on a voluntary basis – not through a single desk.  So the things that the CWB suggests are the strengths of the single desk – market premiums through market clout and “strategic marketing” – don’t even come into play here, regardless of your beliefs.
  • The CWB talks about its “customer relationships” as a strength; it has none in the canola industry.
  • CWB pooling is a form of risk management.  Voluntary pools already occur in other crops; the heavy CWB structure is not needed to form a pool.
  • The CWB offers pricing options.  Pricing options on canola are already available through grain handlers and crushers and work very effectively.  In fact, studies have shown that they are more effective and efficient than the pricing options available through the CWB.  What’s more, they are simple to use and understand.  It’s hard to imagine what the CWB will bring to the table here.
  • The CWB acts as farmer advocate on various issues; marketing canola would add nothing to this activity, nor would this activity benefit the CWB’s marketing efforts in canola.
  •  The CWB says it “ensures farmers benefit from accessing the lowest-cost and highest-value port and terminal options”.  The canola sector is highly competitive and data show that canola handling costs are much lower than CWB wheat handling costs.  How will the CWB’s involvement shrink canola handling costs further?
  • The CWB engages in market development and branding on wheat.  In canola, the Canola Council of Canada has done a remarkable job at promoting canola and developing markets.  Again, it is very difficult to see how the CWB’s involvement, even at a “voluntary” level, would add to the exercise.
  •  Let’s not forget that the CWB comes at a cost; data shows that the CWB cost to market wheat comes in at around $10.00 per tonne, above and beyond the higher system costs.  

The Bottom Line

There is no benefit in having the CWB involved in canola marketing.  What’s more, it would undoubtedly come at a cost to farmers.  If you like the idea of pooling and want to try it in canola, remember you can do it without the CWB.  If you like the idea of averaging out sales over the crop year, you can do that without the CWB too; simply sell an equal amount once a week or once a month throughout the crop year.  The CWB’s Wheat Pricing Pace Model does essentially the same thing – there’s no reason why you can’t do it as well.

Come to think of it, if the canola industry can succeed so well (including farmers) without a single desk, and at a much lower system cost, with an industry-wide organization promoting and developing the market, and you can mimic much of what the CWB does, doesn’t this beg the question: why couldn’t the barley and wheat sectors do the same?

Regarding the seriously flawed MCGA survey, it is so seriously flawed, it is meaningless.  The only good thing about it is, it has allowed a good discussion about what the wheat and barley markets could be like if they were allowed to function like canola.


  1. diversification usually requires a company to acquire new skills, new techniques and new facilities. this stretch is totally customer related and not farmer related.

  2. i've really come to the conclusion that the cwb just does a poor job of marketing. pretty clear in durum that they just cant resist selling below market value. I am very concerned that their involvement in canola will only result in lower prices.

    point two, my average basis in canola this year was under $15 per tonne; durum over 50 ...duh?