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Manitoba Ag Days: Lack of clear grain prices, price discounts and premiums for grain holding back farmers from signing up new crop grain
Jan. 27th, 2012 by Ed White
http://www.producer.com/2012/01/uncertainty-choices-present-challenges-for-farmers%E2%80%A9/
BRANDON — Farmers are being forced to sort through a dog’s breakfast of new crop grain marketing opportunities while a vacuum has formed in publicly visible pricing, crop marketing advisers say.
That situation means farmers need to work the phone lines more than their trucks to find the best price.
“You don’t have to call Alberta to find what they’re paying for wheat to see if there are better opportunities for shipping, because the variability is within small regions,” Brenda Tjaden Lepp told farmers at Manitoba Ag Days.
“Different local elevators that are not that far apart (geographically) have as much variability as different elevators across the whole (prairie) region.”
This is an unusual situation, because significant price spreads tend to occur between regions rather than within local areas. However, the gap between the end of the Canadian Wheat Board monopoly and the evolution of public price discovery mechanisms is leaving farmers with no clear idea of the value of their wheat, barley and durum.
“That’s not normal,” said Tjaden Lepp of FarmLink Marketing Solutions.
“We will move to a place where we will have fairly standard and reasonable transportation spreads between different regions, but today what we have going on is individual buyers working with one end user.”
The gears of the new grain marketing system are being fitted into place, but it is a months-long process that leaves farmers in limbo for now.
A major development occurred Jan. 23 when Winnipeg’s ICE Futures Canada launched its spring wheat, barley and durum futures contracts. If those contracts stay alive and many users begin trading them, farmers will quickly have access to a public price on which most prairie grain contracting will probably be based.
If the futures contracts survive, they will also probably set the specification basis for most grain contracts, advisers say.
Another uncertainty in the grain markets is the role the CWB will play in marketing grain and helping establish prices. No one knows how many farmers will use the new wheat board or how much grain they will move through it.
The CWB will probably be offering short-term and long-term pools, daily cash prices and marketing advisory services, so its activities could help farmers assess the true prairie value of wheat, durum and barley.
“We’re ready,” Gord Flaten, the wheat board’s vice-president of grain marketing and sales, said at the traditional CWB breakfast session at Manitoba Ag Days.
“We think we’re going to be a good option for farmers. We think we are going to be a significant grain marketing (player).”
Flaten said the wheat board has a marketing edge, not just in the relationships it has with end users but also in the financial guarantees it has from the federal government.
“You know you are going to get paid. There’s no contract risk,” said Flaten.
Analyst Greg Kostal said the lack of clear grain pricing and the uncertainty over price discounts and premiums for grain that doesn’t hit the contract specs will hold many farmers back from signing up new crop grain. |
