Monday, September 26, 2011

The Next Ten Months

We need a smooth transition to entrepreneurial and marketing freedom.  Lost in the chatter about transition issues is the fact that prior to Aug 1, 2012 there is a great deal of commercial business to take care of and the CWB holds most of the cards. 

Consider this; at certain times of the year, the CWB may be marketing grain for two crop years.  For example, in March of any year, the CWB will be selling grain for the crop year it is in - ending July 31 of that year - plus it will have begun selling grain for the following crop year which starts on Aug 1.

This year the CWB is expected to maintain its role as single desk marketer until the close of business on July 31, 2012.  After that, the CWB will no longer have a mandate.  However, the CWB is still the single desk marketer of Western Canadian wheat and barley until then and has the obligation to fulfill its mandate to the best of its ability.

However, the CWB isn’t providing any certainty that it will fulfill its mandate through the transition.  For example, although sign-up for 2011-12 Series A delivery contracts is underway, the CWB says given the uncertainty surrounding it’s future, the offering of Series B and C contracts is “currently under review”, giving the impression that it may not market grain effectively toward the end of their mandate. 

The CWB has an obligation – and the power – to ensure there is no uncertainty.  When it makes statements like "future challenges ... will be met with the spirit of our Farmer First initiative" and "…a focus on farmer service in everything we do", farmers expect them to act accordingly.  So why the uncertainty?  It’s not at all difficult; the key is to ensure commercial activity continues uninterrupted.

And then there’s the issue of marketing 2012-13 wheat and barley between now and Aug 1, as the CWB ordinarily would.  As it stands, it could technically make the sales, but it wouldn’t be able to execute them after Aug 1.  So who does this business if and when it arises?  Since few in the trade will take the risk of doing new crop business until the Act has been repealed, then without the new CWB in place there is no one to take care of this business as it arises.

I mentioned it before (Sept 11th) but I make no apology for repeating myself as this bears repeating; the CWB could easily facilitate any early trade in 2012-13 wheat and barley by issuing no-cost export licenses to anyone requesting them.  

Doing this would show that it stands behind its “farmer first” slogan and could give the CWB a boost of popular support.  What is clear is that if it does nothing to facilitate this business, it will lose support.  The market needs both clarity and the opportunity to transact business; right now the CWB is an impediment on both points.

The CWB must do a number of things fast.

It must publicly and clearly advise farmers and customers that it will be there to market grain for the full crop year ending July 31, 2012.  The CWB can – and should – market grain right to the end of this crop year and, if presented with the opportunity, even make sales for shipment after Aug 1 (grain that was delivered on this crop year’s permit books prior to July 31st).  If CWB management and board members see it differently, they need to say so publicly and explain why.

The CWB must facilitate new crop business, giving confidence to anyone trading new crop wheat and barley that it will not impose penalties in the event that the transition process is delayed.  (There is nothing to suggest that it could be delayed, but many farmers and other people in the grain business aren't about to enter into contracts without assurances; we’ve all been there before).  Providing no-cost export licenses is just one (simple) way; there may be others.

The government has options regarding the marketing agency that will replace (in some respects) the CWB.  First, there is no reason it needs to be established on Aug 1st.  In fact, since there seems to be an impasse on what that agency will be able to do, the establishment of it could wait until sometime after Aug 1 - maybe some time in 2013.  Alternatively, if it was up and running before Aug 1 - say Jan 1, 2012 – it could operate concurrently with the CWB for the last half of this crop year, focusing on new crop while the CWB completed the old crop.  But, as long as a business plan for a successor agency is not developed, pressure builds for the CWB to facilitate new crop trade any way it can.

There is absolutely no good argument for the CWB to not facilitate ongoing grain business for the balance of the crop year.  If it was true to its slogan "Farmer First", it would be removing all ambiguity and creating clarity and opportunity in the market for this crop year and next.


  1. Why should the CWB do all this extra work?

    This is the government making the changes, that means it must be the government taking responsibility and ensuring it's decisions don't ruin the whole grain trade. The CWB isn't responsible for ensuring government policies work out well, just like Cargill, Viterra or Richardson aren't responsible either.

  2. I don't want the CWB doing any extra work. All it will do is cost us money out of the pool in this final year of oppression!

    I don't think that Andrew Paterson is losing much sleep over this...

  3. hope you read the article in the western producer about the two producers who farm both sides of the border.
    no better endorsement to get rid of the monopoly
    quote" “Over the years, there have been (U. S.) government programs that have affected (profitability), but just as far as selling wheat into the market is concerned, excluding all the government programs, we’ve still been considerably more profitable here than we have been up there.”

  4. To the first two commenters, John isn't calling for them to do anything more than to actually continue and finish selling the 2011 crop. That should cost the Pool no more than what should have been planned. The alternative is that the federal government remove responsibility for export licenses from the CWB effective immediately so that processors and grain companies can begin to make their own contracts prior to July 31st, 2012.