The CWB Owes It’s Strong Supporters the Best Strategy in the Dual Market

By Shaun Haney

With the loss of the single desk looking to be a reality for the Canadian Wheat Board, the next 14 months is going to be very critical. Many bloggers and pundits are focusing more on what is going to happen to the grain industry or what impacts this will have on the farmer but this week my attention has been drawn to another issue.

What will be the strategic focus of the Canadian Wheat Board up until Aug 1, 2012? There are really two key paths fro them to take.

  1. Try to prevent the elimination of the single desk by attempting to justify the single desk concept and philosophy to Canadians
  2. Embracing the coming change and form the strategy to enable the CWB to survive in a dual market over the long term.

If the CWB decides to bury it’s head in the sand and try to fight the inevitable, my concern is that the Board will not be properly prepared for the dual market.  New competitors like Viterra and Cargill will provide intense competition for grain marketing in the west.   The Canadian Wheat Board owes its strongest supporters the opportunity to do business past August 1, 2012.   The NFU and its leadership I’m sure will work very hard to keep the CWB distracted by trying to save the single desk over the next 14 months.  The CWB needs to resist this urge and make the right strategic decisions for it’s future.

By most expert accounts there is not much that can be done to hold up the Federal Government from making this significant change.  This inevitable change needs to be tackled and dealt with head on instead of fighting the change.  Change is best handled when its embraced and adjusted to.  Change brings opportunity and if the CWB gets to work on the “new normal,” opportunities will become reality and farmers will benefit.

The Ontario wheat industry went through this similar transition in 1997 and the POOL account is still alive today.  I do truly hope that 14 years from now the CWB is still a major segment of the Western Canadian wheat marketing trade.  I strongly believe that the probability of its long term survival and success is very dependent on the strategy that is laid out over the next 14 months by the CWB Board of Directors.

 

Shaun Haney

Shaun grew up on a family seed farm in Southern Alberta. Haney Farms produces, conditions and retails wheat, barley, canola and corn seed. Shaun Haney is the founder of RealAgriculture.com. @shaunhaney

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6 Comments

Andy

Very good point, Shaun.

If the CWB plays their cards right, they will be able to offer pooled pricing for other grains as well (as the MCGA has asked already). Theoretically, the farmers that are in support of the pool for board grains also would support a pooling option for non board grains.

Not sure how it would work, but I imagine that being a company that offers pools exclusively, the CWB could come to working agreements with the grain companies for deliveries into existing elevators, which would mean the CWB would not need their own shipping and storage infrastructure.

If the CWB stays under government control, I see this as the only way that the CWB can effectively be kept. We can’t have a government grain marketer offering the same services as private companies (we already have the CBC!!!). But if they are the exclusive grain pooling company I think it may be able to work.

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Neil

I think all this talk of the CWB somehow continuing to exist in any meaningful form after the loss of a single-desk mandate is wishful and perhaps just a bit naive. It misses answering a question that is fundamental to any success in business, and perhaps even more so in commodities-based organizations and industries:

Who owns the relationship?

In other words, who gets the call when a Pan-Pacific buyer is looking for wheat? Its not the CWB. Its the grain company who gets the call. In this type of transaction the grain company traders preliminarily agree on the terms of the trade and the CWB acts as the approving and verification agency. This approval and verification process (and its intrinsic added expense and delay) is what the grain comanies are eager to eliminate. This will be a huge boost for these companies, all the more so for those that are already vertically ingrated, such as Cargill, for example.

Another and perhaps just as relevant question is:

Who owns the assets?

Again, its not the CWB. A grain company that can successfully and consistently feed its terminal operations through its prairie handling system will earn the most money, since that is where most of the money is made. How difficult do you suppose it will be for an entity with no legislated mandate and no prairie assets to “pool” anything? How easy do you think it would be for those companies with the assets to simply say “no” to what essentially is a competitor who wants to use their assets to conduct business? Given the heavily American/International business philosophy that currently colours much of the leadership of these companies (even, and perhaps especially, the company we consider the most Canadian of the lot) I would say that the chances of the grain companies being at the very least obstructive, if not outright hostile, towards such a proposal are extremely high. In fact, it would be in the grain companies’ best interests to simply form “pools” of their own for those who are not able or not willing to take on the additional burden of marketing their produce themselves.

I think one of the most interesting facet of this Agricutural drama lies in how we ended up with an agency such as the CWB in the first place. I cannot take the time to explain it fully here but I do encourage each of you to research the history and market environment of that time for yourselves. After all, those who do not learn from history are doomed to repeat it.

Reply
Shaun Haney

Very good points Neil. The grain companies will not just say “no” out of spite or vengeance. If the CWB is providing them value and the doing business elevators and ports will do business with them.

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Harry Siemens

Well, well. 1. If the wheat board is as good as it says it is then get to it- hustle your buns off and make it work.

2. Shaun and some others here – Yes wheat sometimes make money and more often than not grown only for rotation. Therefore it doesn’t pay the bills on the farm for most people because had they relied on wheat and barley = many would long be broke.

3. I guess the grain companies and all their employees and owners are just plain shysters and the CWB are the honest ones with their fat paychecks and awesome benefits programs. Those same ‘shysters’ somehow have done ok in canola, oats, flax, sunflowers beans, peas now soybeans corn, and any other cash crop farmers had to grow to pay the bills. Oh, even seed grain Shaun.. How do people trust you and your employees selling outside of the CWB. I really don’t care if the cwb exists after the change with the things they have done to people like myself who dared to call them on some of their bully tactics. If things were ideal and equal, I would trust a rep from shyster Cargill and one from the CWB equally well. The only difference the cwb person has added arrogance to their list of character traits where the Cargill guy just wants to make a buck. Being part of a monopoly will do that.

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Shaun Haney

Harry,
Your thinking within the Manitoba bubble. Wheat is not a rotational crop in Alberta and Saskatchewan. The only reason wheat is rotational in Manitoba is because you can grow corn and soybeans. For many western canadian farmers the most profitable crops are canola and wheat. In Ontario wheat acres are on the rise not because there is no single desk but becasue having wheat in your rotation has benefits for corn and soybean yields. Even better yet is that wheat has been very profitable the last couple years in the east.

If wheat doesn’t pay bills on a western canadian farm right now I think you need to buy a new pencil.

Reply
Kevin Bender

Shaun,

This is over a month since the last post but I disagree with your comment about wheat not being a rotational crop in Alberta. It is on our farm and I know many others who say the same. There are guys in the Peace that grow canola back to back. If it weren’t for disease and resistance issues, we would not grow wheat.

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