Glacier FarmMedia COVID-19 & the Farm

U.S. farmers face uncertainty of CWB deregulation

The expected end of the Canadian Wheat Board’s single-desk marketing powers for western Canadian wheat, durum, and barley in 2012 will likely lead to some adjustments in the flow of grain between Canada and the United States.

Such a move could create some uncertainty for U.S. farmers who could soon face increased competition from Canadian grain at U.S. elevators.

The Canadian government has confirmed its intentions to move forward with plans to end the CWB’s monopoly on the marketing of western Canadian wheat and barley, with legislation set to be introduced this fall in order to be implemented in time for the 2012-13 crop year beginning Aug. 1, 2012.

“We support a free and open market system, and in general we would obviously support the monopoly going away,” said Erica Olson of the North Dakota Wheat Commission on the expected end of the CWB’s single desk system.

However, she noted, some U.S. producers along the Canadian border had expressed concern over the possibility of increased Canadian deliveries at U.S. elevators.

Canadian farmers in favour of doing away with the CWB’s single-desk marketing powers often point to U.S. spot elevator prices across the border that can sometimes be much higher than the pooled returns provided by the CWB.

“Similar prices”

For U.S. growers along the border, the concern is that without the CWB, a resulting increase in Canadian deliveries to U.S. elevators will cause local prices to decline.

The Minneapolis Grain Exchange hard red spring wheat index, which provides an average of wheat prices at 357 elevators across the northern U.S., is currently sitting at around US$11.15 per bushel.

An elevator in Bottineau, N.D., just over the Manitoba border, is currently offering a spot price of US$11.35 per bushel for hard red spring wheat, 13.5 per cent protein.

By comparison, pricing opportunities offered through the CWB work out to about C$7.90 per bushel (US$8.06) for that same wheat in southern Manitoba, according to market participants.

“We would hope that the marketing system in Canada would be able to handle it and give similar prices to their producers,” said Olson, adding that “over time, the market will adjust itself.”

Bill Wilson, a professor at North Dakota State University’s department of agribusiness and applied economics, has conducted research on what the end of the CWB’s monopoly powers would mean for the U.S. wheat market. He estimated U.S. elevators would draw Canadian grain from up to 100 miles from the border.

From a pricing standpoint, he said, the increase in cross-border flows could lead to a number of adjustments in the market, including an increase in U.S. handling margins or railcar premiums.

On the other side, Canadian handling margins could go down, as elevators on the Canadian side of the border will want to prevent loss of business to the U.S., Wilson added.

There remain a number of unknown variables as to what the end of the CWB single desk will mean for the North American wheat market as a whole, Wilson said. He pointed to the CWB’s current role in railcar allocation as one such variable that will see changes under a new Canadian system.

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