All this uncertainty could cost a lot of money

Fortunately or unfortunately - regardless of how you look at it – the federal government is moving ahead with legislation that will repeal the CWB Act.  Although that sounds clear and certain, recent events have clouded things over.

First, last June the Friends of the CWB applied for a judicial hearing about how the Government is handling the reform of the CWB.  Yesterday was the Government’s chance to explain to a federal judge why there was no case – but it failed.  Now the “Friends” will have its day in court as it tries to stop the Government from removing the CWB.

Then there's the CWB's plebiscite.  It will be a shock if this ill-conceived survey doesn’t show support for the single desk.  With that result, the board of directors of the CWB (more specifically, eight of them) plan to carpet-bomb the country with its pro-monopoly rhetoric in an attempt to sway public opinion as a “Hail Mary” play to get the government to reconsider.  According to Allen Oberg, Chairman of the CWB board, even taking legal action against the Government is not out of the question.

These two events provide a generous dose of uncertainty over the next few weeks.  While the CWB directors and their “Friends” are muddying the waters with attempts to stop the inevitable, the business of marketing grain goes on.

For example, by this time in the crop year, the CWB has usually offered pricing options to price next year's crop.  But not this year.  The CWB has announced that it will not offer the futures portion of the 2012-13 Basis Price Contract, and will not be offering the Wheat Storage Program or Churchill Storage Program for 2012-13, all due to the “uncertainty surrounding the CWB's future”. 

This leaves a gaping hole in grain marketing opportunities

I was talking to a senior trader with a grain company earlier this week when he said, "You would not believe how much canola we are buying already for next year." With historically high prices, farmers are locking in prices much sooner than they usually do.  I figure if farmers had the opportunity to forward price wheat right now, they would.

A friend called yesterday from his combine and told me he usually starts to look at pricing next year's crop right around now.  He has used the CWB programs in the past and is now in a quandary; he asked me “what can I do to lock in prices on wheat?”

Winter wheat growers need some price signals right away since they’ll be seeding soon and malt barley buyers tend to lock in supplies early in the crop year.  But it appears they’ll see nothing from the CWB.

If the "uncertain future" is keeping it from making commitments to farmers it follows that it shouldn’t make commitments to buyers either.  But it should allow the private trade to market next year’s crop now.

So what about the private trade?  Why can’t they offer Canadian wheat?  Many of us have been through this before – the 1993 Continental Barley and Minister Strahl's "almost open market" of 2007-08.  Still licking their wounds from those two nightmares, the trade is waiting until they are certain that an open market is really going to happen before they do anything.  Sure, they’re hiring additional staff (even leasing more office space), getting financing in place and revamping computer systems, but trade grain?  Nope, not yet.

So, thanks solely to the CWB and its “Friends”, we have a huge gap in western Canadian wheat commerce where nothing is happening due to the uncertain transition from single desk to open market.  A gap that will be filled by other wheat exporters like Australia, Argentina, the US and the EU.  If the gap is left too long, we could have a pile of wheat to move next year when all the buyers will be partially covered by the time we get our act together.  I can easily paint a scenario where movement and prices next year will be jeopardized because of uncertainty now.

Cynics will say that is what the CWB wants.  They would enjoy a scenario where the new market without the single desk has low prices, poor movement and lost opportunities. They think it will allow them to say “I told you so”.

I would ordinarily find it hard to believe that those that support the CWB because of the market stability they believe it provides, are the ones that are causing so much uncertainty in the markets right now.  But anything is possible, I guess.

The solution is easy - yet hard

To solve this, the CWB could voluntarily provide zero-cost export licenses on any business done for 2012-13 between now and the end of this crop year.  It would have to state clearly and unambiguously that, regardless of how we transition to an open market, the CWB will not interfere with any trade that occurred this crop year with these export licenses (unlike past experiences).

It would be as easy as writing a news release announcing this as an “interim program”.  Yet hard – perhaps impossible – for the ideologically entrenched eight board members who apparently would rather see disorder and turmoil than resolution and compromise.

And really, they wouldn’t be giving up anything.  The CWB isn’t about to do the business so there is nothing to lose by letting someone else do it (without the potential of retribution).  The CWB and its “Friends” could continue with their campaign to save the single desk.  Actually, facilitating the market during the transition period and assuring there will be no retribution, would even earn the CWB a shipload of respect – an asset going forward as a voluntary enterprise.

If the CWB board doesn’t see it that way, perhaps the Minister could instruct the CWB to provide zero-cost licenses.  And while he’s at it, he could relieve the current board of directors of their duties as soon as possible. 

For no other reason than for the sake of a healthy market and a smooth transition.

The Friends of the CWB vs the Government of Canada

In June of this year a lawyer representing Friends of the Canadian Wheat Board (FCWB) applied to have a motion heard before The Federal Court of Canada.  The application was for:

“...a judicial review in respect of the decision of the Minister of Agriculture in his capacity as Minister Responsible for the Canadian Wheat Board (the "Minister") made on or about June 20, 2011 that he will not consult with the board of directors (the “Board”) of the Canadian Wheat Board (“CWB”) and conduct a vote of wheat and barley producers, in contravention of his statutory duty to do so under the Canadian Wheat Board Act, R.S.C. 1985, c. c-24 (the “Act”), including section 47.1 thereof.”

In plain English, the FCWB are saying that the Minister said he wasn’t going to hold a plebiscite and the Act states he must.  So they are asking the Federal Court of Canada to instruct the Minister to hold a plebiscite.

The application for the review was heard by a judge this morning at a special public sitting of the Federal Court of Canada. The result that would make the FCWB happy is the granting of a court date; they got their wish.

I found it interesting that the FCWB (the Applicant) didn’t present anything; I assume the judge had read the application beforehand.  The lawyer for the Government (the Respondent) argued on behalf of the Government for about 45 minutes.  It seemed fairly informal, with the judge asking the odd question, or making a brief comment along the way; even so, it was the Government’s time to explain why it felt there were no grounds for this application and it should be dismissed.

The whole FCWB argument is based on one comment made by Minister Ritz.  Shortly after the federal election in May, Minister Ritz was asked by a reporter if he was going to hold a plebiscite.  His response was “we already did.  It was the general election.”  Based on this alone, the FCWB argues that the Minister is not adhering to the regulations in Section 47.1 of the CWB Act which stipulates that the Minister must hold a plebiscite if he is going to add or remove any commodities from the single desk provisions of the CWB.

The fact that the Minister does not intend to “add or remove” anything from the single desk, rather he intends to repeal the Act completely, seems to have been overlooked.  Even by the government’s lawyer.

I listened to the government’s lawyer argue for the dismissal of this application by repeatedly explaining that the government hadn’t done anything yet (no bill has been introduced) to warrant such an application by the FCWB, and therefore there is no case.  After all, he argued, the Minister has done nothing except talk about what he might do or not do.  Surely you can’t take judicial action simply on comments he may have made.  He repeatedly argued that there are many, many ways the Minister might act on this issue and we have no way of knowing in detail what it is he is planning – nor does the Applicant (FCWB).  Therefore, there is no way to know whether the Minister will be required to follow the provisions of Section 47.1 of the Act (that is, hold a plebiscite).

I was very disappointed in this argument.

If it were me, I would have stated unambiguously and categorically, that the Minister does not need to call a plebiscite because he has made it quite clear – many times over – that he has no intention of removing or adding any commodities to the single desk.  His intent is to repeal the Act, which is substantially different.  In fact, in many media comments and articles, the argument is around whether the Minister should be able to repeal the Act without a plebiscite (which, even the CWB has acknowledged that he has the authority to do without a plebiscite).

In my view, the argument that “we don’t know what the Minister might do” and “there’s many ways he might do it” is very weak.  In a way, it left the door open to the suggestion that the FCWB might just be right. 

To the lawyer’s credit, he did say at one point, however in a “cute” sort of way, that “the Minister is not removing anything from the single desk, nor is he placing anything on the single desk”; rather, he is removing the single desk completely.  As good an argument that that is, it seems it was lost on the judge as the resounding argument heard over and over was “the Minister hasn’t done anything yet” and “we just don’t know what the Minister might do”.

In the end, the judge said he saw no reason to “strike” this application and agreed to a full hearing of the arguments.  In other words, the FCWB will get their day in court, which is what they were asking for.

Although a date was not set, this judicial process will not stop the legislative process in Ottawa.  The lawyers for the FCWB and the CWB suggested an earlier date would be preferred as the government is expected to introduce legislation in early to mid October – and once that happens they will be in a more difficult position.  The judge did not seem to be concerned; although they did talk about selecting the court location that had the earliest court opening.

This is unfortunate.  The grain trade – here in Canada as well as buyers overseas – are looking for clarity and certainty.  Unfortunately they didn’t get it today.  As long as this black cloud hangs over the industry, it will make a smooth transition to an open market harder to achieve.  We all lost today – they may not know it but even the members of the Friends of the CWB.

So stay tuned.   Unfortunately, this bit of theatre still has some life yet.

Can the CWB honour the plebisicte results?

Something just doesn't add up.

On the one hand, Allen Oberg, Chairman of the CWB board, has said that it is the fiduciary responsibility of the CWB board of directors to act in the interest of the current CWB in its current state.  At a CWB meeting in Camrose on Aug 16^th, Mr. Oberg stated:

“On the task force that Deputy Minister John Knubley has commissioned; originally, we were asked to co-chair that task force.  That’s something we didn’t think was appropriate. ...

As directors, whether elected or appointed, our fiduciary responsibility is to the current organization.  And we must always act in this organization’s best interests, and as the single desk is the Canadian Wheat Board’s most valuable asset, it’s our duty to protect that asset.”

And it’s not just Mr. Oberg.  At the CWB meeting in Medicine Hat, Jeff Nielsen, CWB director – and an open market supporter – declined to express his opinion, saying he was bound by his fiduciary duty as board member not to do anything that would damage the current CWB’s interests.

Therefore, they’re saying they can't work on the development of the CWB’s replacement organization, or even the transition to that new organization.  

On the other hand, Mr. Oberg has said many times that the CWB board has agreed to abide by the results of the plebiscite.  In a recent letter to the editor (probably in many papers, but I found it in the Winkler Times) Mr. Oberg says:

“The CWB's board of directors will respect the results of this plebiscite. If a majority of farmers wants to end the single desk for barley or wheat, we will actively support the transition to an open market.”

It’s not clear what he means by “actively support” but it certainly sounds like it means they will work with the government with the transition from the current CWB and in developing its successor.

As far as I can tell, the results of a non-binding plebiscite can't remove the fiduciary responsibility of the board.  If it truly is the board's legal responsibility to act in the current CWB’s best interests before the results of a non-binding plebiscite, it certainly is afterward as well.  They can't change horses mid-stream and arbitrarily decide to dismantle the CWB.  Don’t forget, this plebiscite is non-binding because it is non-compliant with the CWB Act.  Therefore, it is an arbitrary action and the board’s reaction to it will also be arbitrary. 

Even so, let’s go with it for a minute.  This whole story is of particular interest to the barley market.  If the plebiscite result on barley is anything like the CWB's own surveys (and why wouldn't it be?), then the CWB board will be facing a situation where, to be true to their word, they will have to give up the fight on barley and “actively support the transition to an open market”.  

It also quite likely that the plebiscite results will show a majority of farmers voting to keep the CWB intact on wheat.  So what does the CWB do?  Do they “actively support the transition to an open market” in barley and yet "spend all available resources" to keep and protect the single desk on wheat?

Even board member Jeff Nielsen, when asked in an interview with Shaun Haney of Real Agriculture, couldn't say exactly what the board will do in that situation.  Mr. Nielsen didn't say that the board wouldn't follow through on barley; rather, he said that the CWB survey results have consistently shown a majority of farmers want marketing freedom on barley, and in light of the fact the board has never done anything to satisfy them, to ask how can we be confident they will this time, is "a good question".  To be fair, there are a number of ways the board can respond to the plebiscite and Mr. Nielsen can’t be expected to answer for the rest of the board, particularly when you consider he is among the minority on the subject.

I can't say I agree with this fight for survival in any case; I certainly don’t agree with the plebiscite.  Even if you ignore the plebiscite as an inconsequential and arbitrary act, the right thing to do is to give up barley (12 years of surveys should stand for something) and to make the case early and clearly.  On Sept 9th, immediately following the public release of the plebiscite results, they could announce that effective immediately, zero-cost export licences on barley will be made available to anyone who requests one.  

If the plebiscite supports an open market on barley, keeping barley under the single desk until it is pried from the CWB’s hands at end of the crop year will do nothing to support their cause.  I suspect they will be looking for any support they can get as they fight for their wheat life.  They don’t need barley to keep the CWB and keeping barley will not win any friends.

But if the plebiscite results support the single desk on barley, we’ll know just how badly flawed the plebiscite really was.

Cash advance program needs to fit with the new market

First – to dispel a misunderstanding.  The Advance Payment Program (APP) is not a CWB program; it is a federal program offered under the Agricultural Marketing Programs Act.  The CWB is simply the administrator of the program for wheat, durum and barley.  Unfortunately, some producers think that they will lose cash advances on wheat once the single desk is gone.  That just isn’t true.

However, with the removal of the single desk, the economics of wheat, durum and barley marketing will change and it makes sense to take a hard look at the Advance Payments Program with the objective to ensure it fits well with the new market realities.

Features of the Advance Payment Program

The following points paraphrase the description of the program on its website. (Some editorial liberties were taken.)

• The cash advance “rate” paid to producers is based on the average market price of the grain estimated by Agriculture Canada that will be payable to producers over the crop year.  The rate is limited to no more than 50% of the estimated value.
• The maximum cash advance available to each producer is $400,000. The first $100,000 is interest free.
• The “production period” for APP is 18 months and generally runs from April to September of the following year.  This means producers have a maximum of 18 months to repay their cash advance.
• Producers repay cash advances as their grain is sold.  The advance program is repaid in full before the producer receives any payments for grain sold.

These features represent limitations to the program that should be looked into, to make the program work more effectively in a market environment in which producers can readily respond to true market signals.

In an unregulated market like canola (and as we expect to see in wheat), inter-month futures spreads and deferred pricing options are important and valuable market signals and tools for producers.  For example, at harvest time, canola producers are presented with spot prices (for immediate or nearby delivery) as well as prices for later delivery that are, at times, significantly higher than the spot price.   

These higher prices are the market’s way of telling producers that if they commit to a deferred sale, they will be paid to store their grain instead of delivering it right now.  But the need for cash flow at harvest has often kept farmers from taking advantage of deferred premiums as they are forced to sell on a spot basis.  Producers selling more canola than the system really wants leads to weaker harvest basis levels than would otherwise happen.

Many producers taking out an advance still need cash flow from spot sales at harvest.  Therefore, there are still more spot sales of cash crops made than the market really needs at that time.  We know this because of the large price differences between spot and deferred prices; these price differences are seen as very weak cash basis levels and wide inter-month futures spreads.

With the CWB single desk system, this is not an issue.  With the CWB, producers do not react to market signals to decide when to sell and deliver; it doesn’t matter when the producer actually delivers the grain, his net price is the same – the Initial Payment plus any Interim Payments and Final Payment.  In the new market, this will change.

Possible Solutions

Cash advances could be designed to enhance farmers’ ability to respond to market signals.  Often, deferred sales provide better returns than spot sales (carrying charges in the market); in this way, they pay producers to store grain.  If the cash advance was “tied” to the deferred sale, the value of the sale would be known and therefore, more of the value could be advanced to the producer; perhaps as much as 90% of the value (as opposed to 50% of the estimated crop value, as it is now).  Not only would this help with cash flow, it would encourage strategies that provide better returns for producers.

In addition, there are a number of financial tools emerging that could be used to insure the transaction, further supporting these types of strategies.

In the event that cash advances were tied to a deferred sale, when a spot sale is subsequently made, the producer would receive the total payment of that sale, as the advance would not need to be repaid until the deferred contract is delivered.  This too would lead to less grain being sold in the spot position to generate cash flow; unless, of course, the market signals indicated to sell more.

Going forward, as a general concept, cash advances should support the proper use of market signals.  Better yet, they should work hand-in-glove with the market and the signals it sends.

 

Advance Payment Program

Wheat exports to China triple in deregulated market

Interesting article.  The CWB seems to have missed this one.  (I've put the most interesting comments in bold)


Wheat exports to China triple in deregulated market

AUSTRALIAN wheat exports to China have already tripled this year, and demand from the world's most populous nation is expected to lift. 
 
One major exporter said that demand from China, the world’s biggest grain producer, could be sustained.
Australian wheat exports to the world’s most populous nation in the nine months ended June 30 totalled 740,000 tonnes, of which 80 per cent was in bulk and 20 per cent in containers, or about 7 per cent of total wheat shipments, official data showed.

That compared with 238,000 tonnes in the full marketing year ended September 2009.

Exporters cited several factors underpinning a trade that has generated about $230 million in export income already this year, including difficult internal Chinese logistics, the qualities of Australia's white wheat that allow it to be favourably blended with sometimes variable local grades and the positive effects of deregulation of bulk wheat exports from Australia in 2008.

Previously, flour mills in China didn't have direct access to Australian wheat, as the former export monopoly operator, AWB, only sold wheat to Cofco, the Chinese government's grain importer.

Said Tom Puddy, wheat manager for the Grain Pool marketing unit of Co-operative Bulk Handling: “Now with deregulation, this is a clear example of customers in certain markets having access to buy Australian wheat, unlike before.”

CBH accounts for about 35 per cent of the export trade to China so far this year, or about 250,000 tonnes, with AWB shipping a little more than 300,000 tonnes. Other companies involved include GrainCorp in both the bulk and container trade, the Elders Toepfer Grain joint venture and Glencore Australia.

The increase in Chinese buying this year chiefly reflects their wish to replenish inventories, which have been sold down in recent monthly domestic tenders.

Moreover, private buyers have been issued with import quotas allowing them to buy direct from Australian suppliers without going through Cofco, Mr Puddy told Dow Jones Newswires.

AWB general manager for commodities, Mitch Morison, said Australia cargoes, mostly of wheat that has about 10 per cent protein levels, are being shipped chiefly into Guangdong province in the south and, to a lesser degree, Shandong province in the north.

It's cheaper for the Chinese to import wheat sometimes than to haul internally, particularly in the south, where there's consistent demand, he said.

There are also internal quality issues, given the sometimes highly variable milling yield and mixed qualities of some domestic wheat grades, which are blended with imported Australian wheat, he said.

“We would expect to see over time a continual increase in Chinese demand for imported grain,” Mr Morison said.

Some of Australia's biggest customers in Asia, particularly in Malaysia, have interests elsewhere in the region, including in China. These regional clients now want to import in their own right and want licences from Cofco, he said.

“There will be growth of the private sector demand for quality wheat” in China, he said.

AWB sells to Cofco, which co-ordinates all imports and issues licences to import, he said.

Beginning at the time of its former life as the Australian Wheat Board, today’s AWB has had a long trading relationship with Cofco, he said.

Indonesia remains the biggest buyer of Australian wheat, taking 2.2 million tonnes in the nine months ended June 30, or 21 per cent of total exports, compared with 2.6m tonnes, or 18 per cent of total exports that totalled 14.57 million tonnes in the last marketing year ended September 30, 2009.

Mr Morison said demand is rising from Indonesia as new mills come on line, and from Sudan and Yemen.

-- 30 --

Why don't CWB supporters want voluntary pooling?

All this talk of how voluntary pools won't work has got me thinking.  Allan Oberg, CWB chairman, has said it at all the CWB producer rallies and in the media.  Others repeat the same mantra.  Even the media itself, through editors like John Morriss of the Manitoba Co-operator, has tried to define the voluntary pool as impossible.

Thanks to a media that, for some reason, has failed to show both sides of this issue, all we hear is how it can't work because it's never worked before.  They say voluntary pools in Australia and Ontario don’t work.  They don’t even talk about the ones in Alberta and PEI.  But they haven’t even talked to the people involved in these pools to get their views and to find out what is working.  With a little research, they would find that although they’re not on the scale that the current CWB operates, these voluntary pools are providing value to those that use them.

The voluntary pool is the basis of the dual market.  The dual market is an open market with the added option of pooling offered by an organization like the CWB.  The CWB website refers to the dual market (the voluntary pool) as a myth.  For example, the CWB reports that in the dual market of 1936-37, open market prices were higher than the initial payment of the pool, so the CWB received no deliveries from the 1936 crop.  And, in 38-39, open-market prices were lower than the initial payment and so the CWB got all the wheat deliveries and ran a deficit of $61.5 million.

So, obviously, if we go back to voluntary pooling, the same thing will happen again, right? 

I don't think so; before you can reasonably come to that conclusion, you must make the assumption that the pool and the market it is operating in, would be structured the same as before.  This has a familiar ring to it; do the same thing over and over again and you should expect the same results.  It would be insanity to think otherwise.

Doing it differently is something that hasn’t been considered.  We haven’t heard how it might work – or what we need to make it work.  It makes me wonder if CWB supporters even want it to work. 

So, do it differently: think outside the bin.

Considering what hasn’t worked and the benefits and options producers would want, I have designed a voluntary pool; I call it the Voluntary Independent Producer Pool (VIP Pool).  And, yes, it’s structured and designed quite differently than the voluntary pools the CWB offered before 1943.  Here’s what I believe the VIP Pool would offer:

·         It will provide better than average returns over the crop year.

·         It will provide cash flow when needed.

·         Delivery into the system will be a function of dynamic system needs (not passively through a programmed schedule like contract calls).  However, it will allow producers to have input into the timing of deliveries in conjunction with the needs and commitments of the pool.

·         It will serve all farmers – big and small.

·         It will work for producer car loaders.

·         Producers will benefit from storing grain when appropriate and will deliver when appropriate.

·         It will compete effectively with the spot market.  (It will not be starved of deliveries in a rising open market like in 36-37, nor will it be overwhelmed with costly deliveries like in 38-39)

·         It will encourage grain buyers to compete for deliveries through price incentives such as protein bumps, trucking premiums, better basis levels and grade promotions.

·         It will allow individuals to reap the benefit of strong local basis levels relative to other regions.  (For example, in canola we see stronger basis levels around Yorkton.  Pooling canola deliveries in Yorkton with deliveries in, say, Calgary, adjusted only by freight (as with the current CWB pool) is not a fair or appropriate allocation of price.)

·         It is a price risk mitigation tool and will not speculate; individual producers that want to take a position on the market (speculate), can do that independently outside the pool.

In a recent editorial, John Morriss said that you can run a voluntary pool without a wheat board, but you’d give up all the other things the CWB does.  CWB supporters say that without the single desk, the CWB would not be able to develop markets and build customer relations, would not have a voice in grain industry policy, would not have an influence over grain transportation, nor act as producer advocate. 

But let’s face it; you don’t need a wheat board with a single desk to do all these things either.  What you need is an industry willing to work together toward common goals – and yet the greatest impact the single desk has had over the years is to divide and polarize the industry.  Whether it’s because of the single desk itself or the culture of the community that embraces it, it doesn’t really matter.  The industry will be well served by facing up to this fact when considering its future.

Everyone in the wheat industry can see how the canola industry has shown that working together is possible, through the work of the Canola Council of Canada, canola commissions and canola grower associations.  If we can do it with canola, there is every reason to believe that we can do it with wheat, durum and barley. 

If you’re sincere in wanting the benefit of pooling, you need to look at what needs to be done differently to make it work.  I urge all involved – CWB supporters and open market supporters – to think what is needed to make voluntary pooling work.

Will it work?

When we were designing futures contracts at the Winnipeg Commodity Exchange, we knew that even if we designed a technically superior contract, if nobody used it, it would fail.  And the flipside of that is, if people used a fundamentally poorly designed contract, it would succeed.  It is completely up to the users.  Similarly, a well thought-out voluntary pool will work if people use it.

If you're a producer and would like to know more about the VIP Pool, would consider participating in it (or something like it) and would like to see one offered, please send an email to vip@depape.ca.  Let me know who you are, where you farm, and what you want to see in a voluntary pool.  When you think about it, what individual producers want is the best place to start.

And, as always, forward this on to all those you know that may find this interesting.

Any means to an end

The “save the single desk” campaign by the CWB is all about changing minds.  Not just producers’ minds – but the minds of the general public.  CWB directors in favour of retaining the single desk would undoubtedly like to get as many people from all walks of life to believe that the producer isn’t the only one with something to lose.  I’ve already heard calls to write to your MP and tell him/her how you support the CWB - and not the government - on this issue.  The hope is that if Conservative MPs get enough grief from their electorate, they will pressure Prime Minister Harper to slow down, or better yet, stop altogether.

So it was no surprise to hear Allen Oberg, representing the board of directors of the CWB, on a call-in show in Regina (620 CKRM) answering questions from both producers and city-folk.  But the following exchange blew me away.

Kate (caller):     I’m wondering if the wheat board goes, is there any guarantee all that good quality Canadian grain is going to be available for me when I’m buying flour, and pasta and all that sort of stuff, or is it just going to be grain sourced from anywhere that’s maybe not that great a quality?

Allen Oberg:    Well, that’s certainly a concern that has been raised.  ...  I think that in an open system, companies will be looking to source grain from ... any source and put that to any destination.  So that is a concern, that our quality system and that reputation that’s taken years to build up and maintain, whether that will be preserved.

.... There’s no doubt that the US produces far more wheat than we do here in Canada, but when we’re talking a high quality production – number one and two CWRS that market is a lot smaller and we have customers that specifically request that quality and are willing to pay top dollar for it.

Jim Smalley (host):   Kate, you’re the key part because you’re the consumer and you want that high quality wheat which is what Canada, and particularly Western Canada, produces.  It provides a beautiful loaf of bread, unsurpassed in the world.  So I hope, Kate, you’ll continue to buy prairie grain.

Kate:   Oh, I will.  Thanks.

Allen:   And I hope it’s still available.

Oberg's call in show on 620 CKRM

Does Mr. Oberg really believe that high quality wheat won’t be available in Canada without the single desk?  Or does he just want the likes of Kate to think that?

I chatted with my contact at a major baker in Canada and asked him what he thought about Oberg’s comments.  He said they get the quality they order from the millers they buy flour from regardless of whether they are buying flour from US wheat for their US operations, or flour from Canadian wheat for their Canadian operations.  (And yes, sometimes they buy flour for their Canadian production that is made with US wheat.)  In other words, the CWB is not a factor when it comes to quality.

But I think most people knew that already.

Mr. Oberg, representing the CWB board, has started down a dangerous path, saying just about anything to sell people on the virtues of the CWB – or to vilify the open market.

In his recent blog (Aug 15^th), Allen Oberg wrote about what he calls a “Rural Myth”:

The dual market is a western Canadian rural myth.  It doesn’t exist anywhere in the world and it won’t exist here.  A single desk is an all or nothing deal, and I feel like is very important that we are honest about that.

Yes, let’s be honest.  I agree that “a single desk is an all or nothing deal”.  But what we’re talking about is a “new generation” CWB without the single desk, a marketing agency offering unique value and services; most likely pooling.  A while back I wrote about how voluntary pools work and gave the Viterra bean pool in southern Alberta as an example.  Since then, I have been reminded that there are others in Canada successfully offering voluntary pools: Ontario Wheat Producers’ Marketing Board, Ontario Bean Producers’ Marketing Board, and PEI Elevators Corp.  It would sure make sense for the CWB to contact these groups to see how they do it before Mr. Oberg says they can’t exist.

The indiscretions don’t stop there.  The CWB paints grain companies with a particularly harsh brush.  Time and again the grain companies – particularly the larger ones – are vilified as the enemy, just waiting to take advantage of the poor hapless farmer. 

The CWB tries to get away with portraying big grain companies as nameless, faceless companies that will drive the price down so they can make more and farmers make less.  The people that work at the local elevator are friendly, honest, hard working stiffs just like the rest of us.  Their kids go to school with customers’ kids and they play hockey or ball together.  Most employees grew up in the community.  They don’t get up every morning and go to work with the intention of screwing farmers.  (The CWB Alliance produced a video where these companies are described as “thieving bastards”.  Mr. Oberg stated on his blog that he thought the video was “excellent”.) 

It’s amazing to me just how far they will go.  I guess the gloves are off and anything goes; unfortunately that means saying whatever they think they need to, whether it’s true or not.  And when the plebiscite results are announced on Sept 9^th and they show a majority in favour of the single desk, you can be sure the rhetoric will be ramped up even further.