Goodbye CWB Single Desk…Hello Marketing Choice

By Kevin Serfas, Farmer in Southern Alberta

Its one of those moments in time where you say, “where were you when Princess Diana passed away?” Recently we had another where you moment when the Federal Conservatives were re-elected with a majority government.  I can definitely tell you where I was……

It was May 2 and I was in my truck in the middle of the Blood Reserve in Alberta setting up 7 seeders on our first day of seeding. It is the one day of the year that I dread the most because of the fact that I start seeding with 10 of my crew never running anything bigger than a lawn mower. But this time, my first day of seeding ended a little differently than any previous ones. In the midst of everything that was going on in the field, I actually forgot that the rest of the country was in the midst of the federal election. At around 8:30PM I turned on a Calgary radio station to find out that the Conservative Party was declared the winner with a majority. The fact that we once again had a fully functional government was enough to make me breath a sigh of relief.   But the prospect that we finally had a government that was going to take steps in removing the single desk mandate of the CWB…… well it almost brought tears to my eyes.

I’m not going to sit here and go thru the specifics of why the CWB was created. It is laid out quite well on their website.  There was probably very good reasoning at the time for the formation of such a marketing board. Times were tough and something had to be done to make sure that Canadian agriculture, which was still in its infancy, remained sustainable. It was the marketing backbone of newly formed Western economy. Fortunately times have changed and Western agriculture has matured. We now have very stable grain companies in this country that are completely bonded and regulated by different forms of government. The industry has done a very good job of marketing non-board grains such as pulses, feed barley and canola.  Agriculture has boomed to be become big business and global in scope as trade has become the strength of Canadian agriculture. So why is the CWB the only means for Westen Canadian Farmers to market their wheat and malt barley in such a dynamic global market?

There are a few things that irritate me about being forced to sell my grain to the CWB. The first and maybe most obvious is the simple fact that I have NO CHOICE. Sure, they may have set up different types of options thru the board like the Fixed Price Contract (FPC) so you don’t have to put your grain in the pool, but it seems that once the CWB sees that these options are netting more money to the producer than the PRO, somehow an artificial basis falls out of sky which ensures the PRO and the other options net the farmer the same return.  In my opinion this is a matter of personal property rights. My wheat is something that I have produced and so I should be able to sell it.  . It is my right as a Canadian citizen to sell my grain to whoever wants to pay me the most. This just seems to be socialism at it’s finest. In a free democratic country how can any reasonable person say this is fair for the farmer?

My second concern with the single desk is the pricing gap between Western Canada and other areas like Ontario and the United States. I looked today at where the 2010-2011 PRO for #1 Spring wheat 14.5% protein is. It worked out to roughly $8.98 per bushel depending on your freight cost. I then looked at what the price for 14% Protien Springwheat was delivered June FOB Shelby, Montana. That price was $11.39.   Are we ever farming at a disadvantage.  Why are we not seeing these higher returns in Western Canada?  The same price gap exists for barley. How can we have July corn futures at some version of $7.54 but we are selling feed barley delivered Lethbridge at the awesome price of $4.46. I will tell you how. The CWB has done such a good job at exporting barley and feed wheat this year that we have been forced to dump it into the local market at low prices compared to the world market. We might have the cheapest feed in the whole world right here in Southern Alberta.

My third concern is the current voting structure of the CWB elections and the CWB’s position that farmers want their dingle desk mandate. There are too many permit books out there in the hands of people that don’t have a real vested interest in the future of agriculture on the prairies. The CWB election process should have been more based on real producers and acres they REALLY FARM. The simple fact that the prairie provinces almost elected completely Tory Blue during the last election tells me that change is wanted and in my opinion, needed. Stephen Harper and the Conservative have been very clear that they want to give farmers a choice in grain marketing.  They have now been given the mandate. In the meantime, if the CWB feels that their following is so strong, why are they so scared of a dual marketing system. If so many people want to use the old system, the CWB should have no problem burying private company participation in grain marketing. From all the rhetoric that I have heard over the last 10 years that I have from the CWB about the value they create, they should have absolutely nothing to worry about in a dual marketing system.

All that I want as a farmer is to be on the same playing field as my peers in Eastern Canada and the USA. I want to have the same opportunity to sell my grain to whoever I want, whenever I want to better manage my farm. Give me true transparency of where the value of my grain is coming from. Until this past month, there has been little hope in that ever happening. With the Conservative government finally in a majority, we have been given the hope that change is coming in the 2012-2013 crop year. While this isn’t as soon as what I had hoped for the fact that one day soon we will be able to market our grain the same as rest of the free world excites me.

Before I finish, I want to tell you a story about Joe. Joe has decided that he wants to manufacture widgets. There is a strong market for the widgets that Joe makes. So Joe goes out and buys all the supplies he needs to make a years worth of widgets. After a full year of building widgets and paying for all his supplies, Joe is ready to sell them. He is very proud of what he has made and is ready to reap the benefits from a year of work. Problem is he has to sell to the Widget marketing board (WMB) just like everyone else. So he complies and sells for a price that he knows is less than what his fellow Eastern Canadian or American Widget maker is selling for. Joe also has to tell the WMB how many Widgets he has to sell because the amount he delivers must be very close to what he estimated. Did you know that if some of them are faulty, or maybe some of them fall off the truck, the WMB can send Joe a bill for not delivering what he originally predicted. And this has to be done in November. But wait it gets better, as he only gets about 1/3 the amount of what his widget are worth when he delivers them. The WMB has too make sure that they don’t pay him too much in case they don’t do a good job in selling the Widgets to the world. Hopefully during the year, the Widget Marketing Board can do a good enough job at selling that they can ask the Government to make top up payments to keep the widget maker on his feet. You have to remember he has to pay his bank and suppliers for last years materials as well as begin buying new supplies for next years widgets. Finally after 18 months, a final payment will come for the Widgets he bagan building almost 2 years ago.

The ridiculous thing about this story is that, we as farmers have been saddled with an archaic system just like this for far too long. No business person would open up shop with restrictions like this. So while I can understand that there are those that still want to sell their grains through a price pool, I patiently wait for the time when the rest of us can have a real choice and can market our grain through a dual system.

Kevin was born and raised on the family farm outside of Lethbridge, Alberta. Along with his dad Herb and brother Mark, they own and operate Serfas Farms Ltd. Together they manage 38,000 acres of wheat, barley, canola and a 5500 head feedyard. Kevin is married to Jennifer and 5 children, Camerynn, Kourtney, Rhett , Ryan and Tate. When not busy with family and farming, kevin spends time coaching hockey and is a board member for. Picture Butte Minor Hockey.

 

Kevin Serfas

Kevin Serfas was born and raised on the family farm outside of Lethbridge, Alberta. Along with his dad Herb and brother Mark, they own and operate Serfas Farms Ltd. Together they manage 38,000 acres of wheat, barley, canola and a 5500 head feedyard. Kevin is married to Jennifer and 5 children, Camerynn, Kourtney, Rhett , Ryan and Tate. When not busy with family and farming, kevin spends time coaching hockey and is a board member for. Picture Butte Minor Hockey.

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20 Comments

Anonymous

This is laughable – “We now have very stable grain companies in this country that are completely bonded and regulated by different forms of government. ”

The financial institutions were also very stable and regulated, weren’t they?

Reply
Heyoooo

Ummm….the PRO is an expected average price over the ENTIRE year for the pool. Not a snapshot in time. I’m pretty sure the $11.39 in Montana is not the annual average. How does that comparison make any sense?

Reply
Jeff Nielsen

Thanks Kevin, well written and excellent thoughts and opinions. I look forward to Aug 1/12 as well, and I hope during the next year with my participation with in the CWB as District 2 Director, we can still have a viable CWB as a marketing tool, with out the monopoly.
thanks again
Jeff Nielsen

Reply
Kevin Serfas

Heyooo(???), you are exactly right. The PRO is an expected average over the entire year. The thing about it is why do I have to get someone else’s average? If I haven’t delivered any grain until now, my average should start at $11.39. Like I said. This should be my choice. That’s exactly how this makes sense. If you want to get the same price as everyone else, that is your choice. Just give me the choice to do what I want with my grain.

Reply
Heyoooo

Sure. But comparing the PRO to a one-off US elevator price is like comparing apples to oranges, yet it was an integral part of your argument.

Reply
Anonymous

I would like to hear the plan to redesign the CWB to work in a non-monopoly setting – the entire basis for the CWB is to operate as a monopoly. It will take very little time for the CWB to lose international markets, and quickly lose it’s transportation clout.

Also, I think it is important to take a look at the value of wheat in Canada and around the globe. Food and Agricultural Organization (FAO) statistics show quite clearly that wheat in Canada has recently been sold for roughly $100 a MT on average versus only $90 a MT in the European countries. Two major points here – 1) Wheat is of higher quality in Canada due to significant work in public breeding by AAFC to produce cultivars with higher protein and 2) because of the markets open to Canada due to the CWB and it’s single desk in western Canada. If we lose sight of why the CWB has been successful and opt for the “2 in the bush” rather than the “1 in the hand”, we will be on a slippery slope to being at the mercy of the “stable and regulated” grain companies. Also, we run the risk of losing the public research that has provided the knowledge, and work to create the superior wheat cultivars that producers successfully grow today.

I have tremendous respect for producers in Canada. They have real obstacles to overcome every day, however, I think the CWB is an organization that should be allowed to continue to operate as a single desk.

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Anonymous

EDIT – The value of Canadian wheat should be $160 a MT on average. Not $100.

Reply
Andy

Anonymous -Is the $160/MT broken down between CWB and non CWB areas of Canada? Because arguing that wheat from the CWB is worth more cannot be effective unless the CWB and non CWB areas are separated out.

Also, implying that the CWB has been successful begs for you to define success. Is it losing acreage to non board crops success? Because if that is the measure of success, the CWB is doing a bang up job, while the open market in Ontario is an utter failure since wheat acres are increasing.

Finally, one of the most promising new varieties of wheat is WR859CL, a product of Syngenta, not public breeding -although AC Barrie is in its parentage. This also begs the question -what is wrong with private research?

Reply
Shaun Haney

If you look at the wheat breeding market in the US you will notice a plethora of private / public partnerships. Good points andy.

Reply
kevin serfas

Andy you hit on many points I had to make. I am very confused with the numbers Anonymous has put out there. Who is selling quality wheat in Canada for $4.35/bu right now. Private companies have been selling non board grains for decades. Do you grow canola, flax, peas or beans? Who do you sell it to? I’m guessing that if these companies are able to compete in these markets, they can probably compete in the wheat market. I have also sat down with people from Bayer, and this was before the election, to be told that they are going to try and implement the same breeding program they had for InVigor Canola into wheat. Bayer has single handedly gobbled up over 50% of all canola seed sales because of the work they have done in breeding. And everytime a new variety comes out, it has to be better than the next. Once again, I understand that people want to be able to use a marketing board. If there is such staunch support for the CWB, you dont have anything to worry about. The minority of us that want to opt out will take our chances with private companies and CWB should have no problem keeping its international clout. You have to respect the fact that I want to be able to opt out, just like I respect the fact you want to stay in.

Reply
Anonymous

Between the early 1900’s and 2007, 96% of Canadian wheat production has occurred in prairie provinces. I don’t think it is far off to conclude that wheat has been more profitable in Canada overall compared to other countries. We do have a good system. Of course the system could use tweaks, but to completely overhaul the system will not be good for any producer in the long term.

Kevin, could you elaborate on the topic of Bayer implementing the InVigor Canola breeding program in wheat? Are you stating that Bayer will be releasing hybrid wheat in the near future? If so, that is next to impossible.

With available wheat germplasm from public breeding, it is easy for companies to throw some money at wheat breeding at get something that is somewhat improved. It is something completely different to look at the long term breeding objectives and maintain a system that reduces risk for everyone involved.

The recent problems with Canola foreshadow the problems to come with wheat if we go down that road this year. Are you aware that all Canola companies use the same genetic source of club root resistance? These companies will not tell anyone that this is the case, and will maintain that their germplasm is unique. This situation is very bad for the producer. I would argue worse than missing out on a few dollars for a crop of wheat.

One last question Kevin – do you contribute to the check off?

Reply
Anonymous

Yes, but wheat midge resistance is managed with susceptible sanctuaries to delay the resistance break down.

Reply
Garett

Anonoymous, As for the Bayer CropScience Wheat breeding program, there will be more information to come in the coming years, Kevin never once said that it was going to be Hybrid wheat and you seem to be putting words in his mouth.
And as far as the clubroot resistance gene you are talking about, it would be best to know who you are so that I could contact you and inform you of what is actially going on with the different breeding systems and show you that there is multiple gene resistance out there.
Sometimes it is best to have your facts straight before you go on a rant, I fully respect that everyone is open to there own opinion and you are definately entitled to yours.

Reply
Kevin Serfas

As my first blog I am extremely happy with the dialouge this has created. Open debate is very healthy to keep Western Canadian Agriculture viable. I am open minded and sympathetic to concerns people have both for and against the system. This is just an expression of my opinion and the way I feel. One small thing though. I will not publicly tell you to who and where I put my check off money to. Especially when it is being asked by someone who is not willing to put their name on the question.

Reply
sasky

Over many years and with a lot of money I’m sure the CWB has developed a wealth of knowledge, a network of contacts, logistics systems and IT, and have some excellent people in house. It would be a shame to watch that all just go “poof”. The thought is that the CWB can remain viable against the grain companies, who also have all those things. However, without collection and port infrastructure, and no hammer to use on the rail companies, can the CWB really survive? Why would the grain companies offer the use of their infrastructure to a competitor? Wont the grain companies run in and hire the best CWB employees, and all their knowledge with them? Maybe their infamous fleet of vessels is the only part that will survive?

Reply

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