The Calamity Which Is Orderly Marketing

First the good news. Earlier this month Health Canada approved the first vaccine for Covid19. In Ottawa and Toronto health care workers were the first Canadians to receive the Covid 19 vaccine. It signals a light at the end of the tunnel. For Canadians all across this vast land it can’t come soon enough.

Covid continues to ravage, although to some extent our agricultural markets have adjusted to the fracture which was Covid back in March. At the present time, that fracture isn’t as bad as the adjustments which were made even though now Covid is much worse across Canada and the United States. Needless to say, we move on. Lockdowns might be ahead of us. We’ve been there before, and agricultural markets will likely continue to function better than they did before.

We shouldn’t take that for granted. “Orderly marketing” was once a buzzword in agricultural circles, and it got me thinking about it last week. I had a colleague chime in from Western Canada talking about his marketing freedom vs what he had to do before the Harper government eliminated the monopoly power of the former Canadian Wheat Board. I reminded him that he got exactly what he wanted, which was the lowest basis levels in North America, and he should be satisfied with that. He shot back that there was a lot more to it and I agreed he had a bit of a point. Needless to say, in his case, opening up a market to the forces of competition is what he wanted. Whether its “orderly” or not is another thing. .

Back in the day the term “orderly marketing” had a bit of a social aspect to it. At the time, interest rates were double digit, over 20% for a time, and commodity prices were low. Overall global demand for our agricultural commodities was much lower than it is now, as was production. There were hard times and when farmers looked to food at the retail level, many thought there should be a better way and a little more fairness in the distribution of that food dollar. What we needed was something more, ah hem, “orderly” and fair.

I know most of you aren’t interested in a history lesson. The “orderly” marketing thing morphed into many things through the years with forgetfulness being a large part of it. Over time, farmers transition through the generations. Newer generations have newer, better ideas. Over time, the free market has won out in Canadian agriculture with the exception of the supply managed sector. It can be argued the supply managed sector is the most orderly of any Canadian agricultural sector.

Keep in mind, during this Covid dark winter of 2020/21 the price of corn is $5.50, and soybeans are $14.50. about as high as it has been for quite some time. Some Ontario and Quebec farmers might argue that’s orderly enough for them. Then last week a friend of mine let me know a new Gleaner combine without heads was $504,000. It would take a lot of “orderly” in our market to get that paid off for sure. Needless to say, I’m of the camp that our farm markets can be more orderly. In other words, I think farmers can be paid more, within the markets they are already in. To go further, there is nothing particularly just about the free market in agriculture. It especially feels that way when farmers are often blamed for higher food prices as the Big Grocery oligopolies set higher and higher prices. Doing it during Covid has been shameful.

Move over to Russia for a minute. Most of us grow some wheat, even though the acreage continues to go down across North America. In fact, wheat prices have increased over the fall, only to decline lately, but rise again today on the futures market. In Russia, President Putin doesn’t like that much. In fact, Russia will be administering a grain export quota and export tax for Feb 15-30th according to a recent Reuters report. Mr. Putin has been criticizing the rising prices of bread, flour and sunflower oil. He was backed up by his Prime Minister who said they needed to “stabilize” prices of food products which are important to people. This is happening in an environment where Russian incomes are decreasing largely due to the Covid crisis.

In other words, Putin wants to get his priorities straight. He wants some “order” to the market where the people can comfortably afford their food. He might get it done through an export quota or an export tax, but if that’s what it takes for an “orderly market”, that’s what it takes. Surely some Russian farmers with 1000-hectare farms will be upset.

Of course, in North America, we’ve got all the foreign exchange and food we want. We even have incomes which are rising amid the major hiccup of Covid. Last December 10th, the USDA released their latest report and lowered US ending stocks to 175 million bushels. They kept soybean yield at 50.7 bu/acre and corn yield at 175.8. Soybeans shot up 19 cents a bushel on the news, only to finish down 5 cents/bushel. Everybody yawned, including farmers.

It is a complex world of order when it comes to our markets. Covid 19 makes it even more so. A year ago, we were over a billion bushels of carryout on US soybeans. Today, we’re wondering about it running out. It’s what we call orderly in our free grain market. However, sometimes that “orderly” marketing isn’t for the feint of heart. It’s different around the world. It would be nice to have a bit more stability. Just ask President Putin. Needless to say, he at least has a bit of power to force it his way for a few months. For the rest of us, “orderly marketing” is what it is. It’s a controlled calamity tamed by good risk management. At least that’s where we are in 2020. It’s been a long road.