Time for CWB to outline goals of privatized marketing system
It would be good to know what the federal government and the managers of CWB see as the mission of a privatized CWB.
Is it simply to have a sustainable business plan and operate in the Canadian grain marketing sector, or should it bring a new business attitude to stand out from the competition?
The Canadian grain marketing sector needs a new dose of competition to deliver on the promise contained in the Marketing Freedom for Grain Farmers Act.
Eliminating the Canadian Wheat Board monopoly was to cause grain prices to “respond better to market demand, giving farmers the opportunity to achieve the premium prices they deserve,” according to a government backgrounder on the legislation.
But for more than a year the Canadian market has offered nothing close to premium prices.
The rail transportation problem last year caused grain companies to post extra-wide basis levels, dropping Canadian prices well below world levels. The wide basis discouraged delivering into a clogged system but also generated a profit windfall for grain companies.
The rail crisis is now over, but prairie grain prices still lag. American grain elevators offer shockingly high premiums for durum over prices at elevators in Canada.
The marketing freedom act allows farmers to access the U.S. market directly, and some have been able to take advantage of that freedom.
Indeed, the United States, with its higher prices, is increasingly an important market for western Canadian farmers. Seventeen percent of Canadian wheat exports went to the U.S. last crop year, up from 10 percent in 2011-12.
A good portion of that business was farmers selling directly to American buyers.
However, the volume was not enough to arbitrage the two markets, as market freedom proponents anticipated.
Independent analysts can’t identify a reason for Western Canada’s lagging prices today except for lack of competition and grain companies padding their profits.
The government expected that its marketing freedom act would spark investment and innovation, which would lead to a more competitive Canadian grain market.
There is some investment, in country terminals and port facilities, but not the level of competition that would cause most farmers to call the marketing freedom law a full success.
The government has staked its reputation on addressing competition shortfalls in another sector of the Canadian economy — wireless service — but has failed to encourage a new player to enter the mobile service market.
In the grain sector, through the CWB, the government already has a tool to shake up the status quo.
However, agriculture minister Gerry Ritz is mum on his vision of a privatized CWB, preferring to wait for CWB management to present a plan.
CWB has said only that it wants to be a company with some farmer equity operating a network of grain handing facilities.
The Farmers of North America campaign to buy CWB creates the impression of an urgent need to act lest an opportunity be lost.
It is hard to evaluate the FNA proposal as long the CWB’s own plans are so amorphous.
Granted, the CWB’s plan is a work in progress and it can’t be expected to conduct commercial negotiations in public.
As well, it would be best for the federal government to avoid meddling and remain at arm’s length.
However, a broad mission statement about CWB’s goals, its reason for existing, preferably identifying it with service to customers, building its own success through enhancing farmer profits, would provide welcome illumination.