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Corn+Soybean Digest

More Big Changes in Canada


Change is coming to the Canadian Wheat Board (CWB) and with it, big changes for grain producers and the entire grain-marketing system in Canada. Predicting change is perilous territory. I’ll take a shot.

Grain movement across the border will increase when the CWB loses the right to be the sole buyer of wheat and barley. Initially, I expect a sharp increase in the truck movement of grain from Canada to the U.S. (Is border security ready?) Shuttle elevators along the northern tier of North Dakota and Montana are in a good position to increase their trade territory and volume.

Why won’t grain flow the other way? The name of the game will be speed and efficiency and U.S. elevators, particularly shuttle-loading facilities, know the rules of this game. In addition, Canadian Grain Commission regulations are very strict in regulating the separation of wheat in Canada. Can these regulations survive? Eventually, regulations will have to change, and Canadian elevators will adapt to the new rules, and grain will flow both ways.

How will an increase of Canadian wheat and barley movement into the U.S. affect the average corn and soybean producer? This could accelerate an already well-established trend of U.S. small-grain acreage shifting to corn and oilseed acreage. The Corn Belt will continue to expand West.

The CWB has long nurtured its reputation and brand as a supplier of high-quality wheat to the international market. How does this identity-preservation system jibe with the coming grain market free-for-all? It doesn’t. Identity-preserved grain has been and will continue to be a niche market. Servicing a niche market costs more. The CWB does an admirable job providing this service to all of its customers. In the future, however, not all buyers of Canadian grain will want it enough to pay extra for the service. Servicing a high-quality niche may be a role for a restructured and smaller CWB in the future.

Changes at the Wheat Board mean changes up and down the system, including changes for producers, the transportation system (Canadian and U.S. railroads operate very differently) and the grain-handling system (local and export facilities). I am confident in the Canadian farmer’s ability to adapt quickly. Canadian grain handlers and the rail system will feel the greatest shock. These industries must make the adjustment from the CWB’s slow and methodical delivery system to the faster pace of a market-driven U.S. system.

Does a different marketing system call for a new futures contract for Canadian Western Spring Wheat? ICE Futures Canada thinks so, and its new milling wheat futures contract began trading in late January. This contract will compete directly with an already well-established HRS wheat contract at the Minneapolis Grain Exchange. The future for new wheat futures at ICE Canada is not bright. The history of success and failure with new futures contracts is clear: When two futures markets exist for essentially the same commodity, trading migrates to (or remains at) the most successful and liquid market.

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