The Canadian Wheat Board is poised to lose its monopoly grip on the country's wheat sales. Canada's Conservative Party captured a parliamentary majority this past spring, and newly elected government officials took that as a mandate to end the wheat board's reign.
The ripple effects from eliminating—or even weakening—the board's power would be widespread. Wheat prices, which already have experienced extreme highs and lows over the past three years, could become more volatile, some analysts say....
Farmers who favor the board, including its current chairman Allen Oberg, contend the benefits far outweigh the cross-border price differences that can emerge. By controlling the whole crop, the board has considerable power in global commodity markets to ensure Canadian farmers get the best price. Farmers also get an up-front payment that is backed by the government, and the board doesn't aim for a profit, so more money goes back to farmers than under an open-market system....
The board basically sells the grains and then divides the returns among the wheat and barley growers in western Canada.
So farmers get the average price over the course of a year, never capturing the top of the market, but also never selling at annual lows.
The board has added other pricing options over the years, including allowing farmers to sell their crop up-front for a fixed price.
The estimated return for a Canadian farmer in the board's traditional sales program is estimated at $7.19 to $7.48 a bushel for the spring wheat coming out of the fields now. That compares with Wednesday's U.S. cash price of $8.85 a bushel, according to MGEX.
The wheat board cautions against trying to compare the price Canadian farmers are expected to receive against current market prices in the U.S., saying the timing, location and system of sales are all different.
Monday, 12 September 2011
The Canadian Government Wheat Monopoly
Canada Is Taking Aim at Its Wheat Monopoly says the WSJ: