Setting up and developing a test market in Alberta is the best way to give farmers the flexibility they need to maximize returns.

Commercial farming is a business, and like most businesses, producers need to make good use of every economic opportunity available to them to improve their bottom line. In fact, the future viability of farms in Alberta depends on it.

That is why the Alberta government has enacted the Alberta Wheat and Barley Test Market Act. Through that Act the Alberta government declared its intention to bring about marketing choice by entering into an agreement with the federal government, the Canadian Wheat Board or both.

The Act calls for the establishment of an open market on a test basis for the purchase and sale of wheat and barley produced in Alberta. Alberta producers of wheat and barley would have the option of selling their product to any buyer, including the wheat board. The test market would be in place for a minimum of ten years.

While the Alberta Wheat and Barley Test Market Act will not create an open market immediately, it does represent an important step in the struggle to restore the inherent rights of Alberta producers to control and sell their product to whomever they choose.

This does not mean throwing the baby out with the bath water. A test market would not abolish the farmer’s choice to sell through the Canadian Wheat Board. It would simply allow alternatives to operate next to it.

The wheat board would continue to operate without the single desk as long as farmers want to use the wheat board services, and if the wheat board is prepared to compete. For example, the wheat board would need to determine if there is a demand for price pooling. Services such as cash advances (a federal government program), price forecasts, and market development could be provided by the wheat board or by other organizations.

A test market would give farmers the opportunity to improve cash flow – an important factor in many highly capitalized farm operations. With the introduction of competition into the marketing process, value-added industries will be more willing to invest. The test market addresses the fact that farmers know what is best for their individual operations.

Global opportunity
On the world scale, Canada is no longer a low-cost producer. We must identify and compete in new markets to retain or grow market share. Farmers know that they must increase their competitiveness to compete globally. A test market would give farmers in Alberta the ability to sell their product into global markets at the right time to maximize returns, and at the same time, respond in a timely way to the end-user’s demand for specified product.

As margins thin for traditional crop production practices, farmers, to remain viable, must seek new ways of doing business. This process will evolve just as the test market will evolve. A test market won’t happen overnight. Farmers will need to participate in and guide the development of a test market over time.

Survey of choice
Even with clear benefits, the question remains: Do Alberta farmers support change? An Ipsos-Reid survey of wheat and barley growers in Alberta shows that the majority of Alberta’s wheat and barley growers would prefer a system where they have the option to sell their wheat and barley to anyone (including the Canadian Wheat Board) and into any market.

The key objective of the survey, commissioned in 2003 by Alberta Agriculture, Food and Rural Development, was to identify the level of support for marketing choice for wheat and for barley within Alberta.

Only one quarter of Alberta wheat and barley growers would like to see the current single desk marketing system retained, as it currently exists, for both wheat and barley. Importantly: Almost three-quarters of farmers surveyed say they are looking for some reform that enables more marketing choice. Most of these, (59 per cent), would like to see a system that offers marketing choice for both wheat and barley.

Producers who prefer marketing choice have three key expectations of a changed system: better prices and returns, freedom of choice, and access to more markets. They also would like to see more competition, efficiency, and flexibility in the marketing system.

Flexibility would allow them to respond individually to global market signals. Prices would be determined by world and domestic supply and demand factors. Average yearly prices may not be higher or lower in such an environment. However, farmers would have a wider window for pricing, allowing them to capture opportunities when prices rally and operate more efficiently by being more in tune with buyers-needs.

To expect the wheat board to maximize returns for individual farmers is unrealistic and not feasible. To do this, the wheat board would have to pick the highest price of the year and sell all wheat and barley at this time. Obviously this is impossible to do.

Why should producers as individuals be prevented from taking advantage of higher prices? The institution of a 10-year test market would address these important issues and also give value-added industry the freedom it needs to develop in Alberta.

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