It is like the weather is tricking me. This weekend it is March, which among other things represents a time when the calendar changes to spring. However, tonight once again, the weatherman is calling for record low temperatures. The last seven weeks have been cruel. Spring can’t come soon enough.
Needless to say, as much as I want spring to come, I’ll just have to wait. On farms across Canada and the United States, when the warm weather finally gets here you will certainly see a flurry of farm activity. There is something about -20 degree temperatures, which keeps many of us in the house. However, yes, regardless of temperature spring is almost here. We need to grow those crops to satisfy all those good prices that are in our future.
Of course those prices don’t necessarily do what we want them to. Every farmer wants to buy inputs low and sell his crops high. Prices never work like that but somehow we find a way. Increasingly though finding the true price of commodities can be increasingly difficult. For many across the Canada price transparency isn’t necessarily that apparent.
In other words, how do we really know that the cash grain prices that we are receiving our real and fair? Are the prices we receive for our corn and soybeans valid? Do we need to dig deeper, or is the price of corn just the price of corn? Or does it depend where you live? What does this price transparency mean?
From my perspective price transparency means totally understanding why our cash grain prices are what they are. Do they make sense? In southwestern Ontario where I farm cash grain prices are published across the province on a daily basis. It is based on futures value and basis levels in different locations from Windsor in the Southwest to Ottawa in the East. I like to think of it as complete price transparency. If you get a price for your grain, you can easily check with that published list from the Grain Farmers of Ontario and generally speaking, it will be very close. So in my neighborhood the price of grain is the price of grain. I look around and it’s all the same. There is a myriad of choice.
It is that way because there are many buyers and sellers and considerable volume of grain to make it all work. However, I have being in areas within Canada, where grain marketing is relatively new and price transparency is a problem. I find this to be an issue in Québec and Western Canada. Of course, I also find it to be a big issue in Atlantic Canada, but that is mainly tied to the low volumes of grain, which are produced there. When I speak about the grain markets in New Brunswick or Prince Edward Island, I always mention price transparency. It can be a problem there. Farmers really have to know how prices are determined to make sure they are getting a fair price.
In Québec there is a lack of price transparency partly because of few buyers compared to Ontario as well as a large domestic feed market controlled by few players. Buyers hold their prices close to the vest and there is no widespread provincial published list of elevator prices. With Québec’s proximity to saltwater, export prices can be very real, but basis throughout the province can be sloppy. It is a challenge for farmers in Québec to truly understand their own agricultural price market structure.
In Western Canada, I find it quite different with regard to price transparency. The demise of the former Canadian wheat Board gave way to marketing freedom, which in my mind meant marketing responsibility. Producers who never had to think about futures and basis for wheat and barley suddenly needed to. In other words, they had to think about it in terms of the way they price canola, a combination of futures prices and basis. However, when you infuse the complete rail transportation disaster of the last two years into the equation, price transparency was like a brick wall. It was hard to figure out the price of any grains if they couldn’t be moved to market in a timely fashion. Unfortunately, even though it is slightly improved now, this seems to me to be a structural impediment to true price transparency for the Western Canadian farmer.
There are some new initiatives in Western Canada to get that changed. Putting a value to cash grain across this region needs improvement. It’s also true for crops without futures markets such as peas, lentils and flax. Ditto for Québec and ditto for the Atlantic provinces. It seems like Ontario, which has excellent price transparency in my opinion simply takes it for granted.
On Twitter every so often I take a snapshot of the DTN cash prices for both corn and soybeans across United States. These little cash grain maps show complete cash pricing for almost every county in the Eastern and Western corn belt. Unfortunately, we don’t have that for Western Canada, Québec and the Atlantic provinces. The reason is its simply too hard to collect, it isn’t transparent.
For Canadian farmers, that’s a big problem. I can speak about risk management and grain prices forever, but if you don’t have price transparency, how do you really know what you have? Simply put, you don’t. The faster we recognize that in many parts of Canada, the better. Efficient markets demand price transparency. As it is now, somebody somewhere is not being treated fairly.