Open-market optimists post-CWB

Challenges A Canada Grains Council panel identifies some new issues in wheat and barley marketing

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There’s lots of optimism ahead of ending the wheat board’s monopoly Aug. 1, but there will be challenges too, according to a panel that spoke at the Canada Grain Council’s 43rd annual meeting in Winnipeg April 16.

“I just say the sky is the limit now,” said Western Canadian Wheat Growers Association president Kevin Bender. “There are so many opportunities with what can be done.

“I’m really optimistic.”

Farmers will do more direct selling to processors, which will reduce the need for as much on-farm storage, Bender predicted.

Concerns that grain company contracts are one sided is scaremongering, he said. Reputable companies want farmers’ current and future business.

“One positive I see is the whole monopoly/open-market debate is essentially going to be over,” Bender said. “It’s going to take all of that energy that was devoted to arguing back and forth and fighting and putting that somewhere else so we can move this whole industry forward.”

Canadian maltsters are looking forward to the predictability of an open market, said Phil de Kemp, president of the Malting Industry Association of Canada Ltd.

“But I can’t overemphasize the fact that there are a lot of other challenges,” he said.

Among them is cutthroat competition from Chinese maltsters who buy Canadian malting barley, malt it and then undercut Canadian maltsters in foreign markets. De Kemp said he suspects it is because Chinese maltsters don’t pay corporate taxes.

Fewer and bigger

Beer companies, which purchase malted barley, are becoming fewer and bigger. Maltsters might have to follow suit “in order to offset some of the economic power that brewers have,” de Kemp said.

Canada’s grain handlers will manage grain movement more efficiently in an open market, said Jean-Marc Ruest, Richardson International’s vice-president of corporate affairs and general counsel.

But even more changes are needed, he said, including to the wheat variety registration system. Canada is known for its high-quality wheat, but there’s no reason it can’t also produce slightly lower-quality milling wheat.

Now five or six new wheats are registered annually compared to 100 new canolas, he said.

“I think it underlines a need to find a way to increase the number of varieties that are registered and allow the marketplace to decide whether or not they gain traction,” Ruest said.

“When we make these changes we have to make them responsibly because once the genie is out of the bottle it’s real hard to put it back in.

“We need to make sure we’re not throwing the baby out with the bathwater.”

Grain companies will have to figure out whether it pays to provide the grain quality and service some buyers are asking for, he said.

The whole grain pipeline needs to improve efficiency and CP Rail wants to co-operate to make it happen, said Steve Whitney vice-president of marketing and sales, agribusiness and market development.

“I think the business will take on a more North American complexion in some ways,” he said.

“We anticipate seeing more and more north-south flows for wheat and durum with U.S. acres moving more over to corn in particular and soybeans.”

CP Rail has created eight “hubs” across the West where it drops empty cars, providing some elasticity in car supply when problems arise. As of March 31 CP Rail’s car unloads exceeded its five-year average by 16 per cent, Whitney said.

On time

Deliveries of empties were up 25 per cent from 2010-11 and 90 per cent of cars ordered were spotted on time.

“I can assure you that’s a dramatic lift from the past year,” he said.

Car cycle times to Vancouver and Thunder Bay have dropped to 14 and 11 days, respectively.

CP Rail will have the capacity to haul more grain, even as other traffic increases, Whitney said. The railway has increased its capacity to move potash by increasing the number of cars in a train to 170, he said. Grain trains typically have 100 to 112 cars.

“We are well ahead of the curve and we intend to stay well ahead of the curve,” Whitney said.

SGS, the private grain-inspecting company, expects lots more business, in an open market, said Fraser Gilbert, the firm’s agricultural services business development manager.

Private grain companies won’t have as much surge capacity as the wheat board so knowing the exact grade and specifications of grain before it even gets to a country elevator will assist in managing grain movement, he said.

The increasing demand by customers for grain purchases to meet certain specifications, will require more testing.

SGS was already inspecting 70,000 to 80,000 hopper cars annually on behalf of the wheat board, Gilbert said.

Expected changes to the Canadian Grain Commission, including making inward grain inspection voluntary, will also drive more business to SGS.

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