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CWB jumps into the canola pool

Success marketing oilseed will be litmus test of company's new era

By: Martin Cash

Friday, Aug. 24, 2012 at 8:26 AM | Comments: 0

Bruce Bumstead / Brandon Sun Archives The CWB confirmed rumours it will enter the canola market.

As expected, the new Canadian Wheat Board announced on Thursday it is setting up a canola pool to market the lucrative Prairie oilseed crop.

It will be the first new crop in 63 years the CWB will handle and the relative success of its new canola-pooling option may very well provide the best evidence yet of farmers' desire to do business with the CWB.

Initial payments for canola, the second-largest crop grown in Canada, are expected to be announced by early September. CWB's first Pool Return Outlook for canola, issued Thursday, is $640 per tonne.

Controversial federal legislation -- the Marketing Freedom for Farmers Act -- ended the CWB's single-desk marketing powers for wheat and barley for this crop year on Aug. 1. It also gives the new CWB authority to market any crops, from Canada or abroad.

Ian White, the CWB's chief executive officer said the new corporation's entry into the canola market should not be a surprise.

"We have been saying for some time that we would have an offering on canola," he said. "And farmers have been saying to us for a while that they would like us to get into the canola business and provide an extra competitive element there."

The big question is how many of them are looking for that option.

There is also a big question as to how many Prairie grain producers will continue to sell their wheat into the CWB wheat pools.

Under pooling, all revenue is deposited into a single pool and participants are paid the average achieved across the entire marketing period. That marketing option allows price-risk management and eliminates a lot of the uncertainty in dealing with the ups and downs of the market.

Rick White, general manager of the Canadian Canola Growers Association, said canola producers in general have been satisfied with existing marketing choices that have been available. But he said having another one is a good thing.

"It's difficult to tell in general how successful it will be," White said. "What is important is that it's another option for canola farmers. That's always welcome. Farmers will have to assess their options and choose to use what's best for them in their individual farms."

The fact this year's canola crop may be the largest in history -- and canola prices are at, or near, all-time highs -- may or may not be a good thing for the CWB's first crack at the market.

Analysts say choosing pools as a marketing tactic is most successful while prices fall, but may not be the most profitable option while prices rise.

The new CWB is entering the new era in the Prairie grain business as the only grain company now offering either wheat or canola pools.

It's also the first year Prairie farmers will have the choice as to how to sell their wheat, whereas in the past they had no choice but the CWB's wheat pools. (Through the years the CWB also offered cash options for wheat.)

But some analysts, like Brenda Tjaden Lepp of FarmLink Marketing Solutions, said this year will provide the best evidence yet as to how many farmers did like to use the CWB's pools.

She said it is a reasonable expectation the farmers who wanted to sell their wheat to the CWB might also be happy to have the chance to sell their canola into CWB's canola pools as well.

"But it's a major unknown," Lepp said. "What percentage of grain going into the open market is from producers who think the CWB performs really well? There has been no solid research presented in the past. People have argued both sides, but there has been nothing credible (to back up either side of the argument). It's a big question mark."

But she said a CWB canola pool is a compelling proposition.

She and others said the fact the CWB has an extensive international sales organization that has successfully sold the massive Canadian wheat crop ought to position it well to also sell canola.

"The marketing of canola is something we can easily adapt to," the CWB's White agreed. "It's hedge-able -- just like wheat, we can sell it to much of the same customer base that we currently have."

martin.cash@freepress.mb.ca

Reaching across the country

Farmer delivery locations for CWB canola:

Manitoba

Delmar Commodities: Jordan, Sperling, Gladstone, Somerset

Linear Grain: Carman

Mission Terminal: Alexander

Parrish & Heimbecker: Dutton, Glossop, Transcona

Saskatchewan

Fillmore Seeds: Fillmore, Creelman, Osage, Glenavon

Great Sandhills Terminal: Leader

Mission Terminal: Neville

North West Terminal: Unity

Parrish & Heimbecker: Hamlin, Langbank, Moose Jaw, Moosomin, Quill Lake, Saskatoon, Tisdale, Watrous, Yorkton

Prairie West Terminal: Dodsland, Kindersley, Luseland, Plenty, Prairie West

Providence Grain Group: Marengo

South West Terminal: Antelope

Alberta

Lethbridge Inland Terminal: Lethbridge

Parrish & Heimbecker: Bow Island, Medicine Hat, Milk River, Vulcan, Wilson

Providence Grain Group: Crossfield, Gaudin, Viking

Westlock Terminal: Westlock

British Columbia

Agro Source: Dawson Creek

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