Open market in full swing in 2004

Ian Carter
President, London Agricultural Commodities Inc.
London, Ontario

Ian Carter says that the open desk system in Ontario has been implemented in steps. The Ontario Wheat Producers’ Marketing Board in 2000 exempted 150,000 tons of wheat, then moved to exemptions for 300,000 tons. In 2003 the doors were thrown open.

Carter says,“No-hassle selling is one of the results of the open market system that producers appreciate. The single desk selling system frustrated a lot of producers.” Since many producers grow corn and soybeans, they are “very accustomed” to managing the sale of their products themselves. “Wheat to them is no different,” he says.

Time delays and the bureaucracy around wheat sales were difficult for farmers to deal with.

The new open market system for wheat in Ontario has not resulted in a large number of Ontario farmers crossing the U.S. border to sell product.

“Although that option exists, the infrastructure has developed to accommodate producers marketing through the local elevator or grain dealer. As for exporting to the U.S., there’s quite a bit involved in terms of logistics, border legalities, and paperwork. Grain companies provide that service so most farmers take advantage of a more streamlined system.”

Carter says, in general, Ontario producers are satisfied with the Ontario Marketing Board and the new system. The climate is more market-driven, which spells greater opportunity.

“At the close of the 2004 season, the open desk system will have been in full swing for one full marketing year,” says Carter. “In 2003, a lot of producers had forward contracts with the Ontario Wheat Producers’ Marketing Board before unlimited Direct Marketing was allowed. This year, Ontario farmers have real choice where they sell their wheat. It will be interesting to see what they decide to do.”

Mark Hayhoe
President, Hayhoe Mills
Woodbridge, Ontario

Mark Hayhoe says that market choice in Ontario has been producer driven with very positive effects. “Open desk marketing has been a boon to the whole industry,” says Hayhoe. “It’s helped the producer, and new investments have stimulated growth in value-added industry.”

He adds: “We’ve seen new investment from General Mills. We’ve seen plants add new capacity, and even new plants started. There’s no denying that an open market has removed barriers to investment.”

The future looks bright with a lot more new and exciting innovations to come. “Since the Ontario Wheat Board dropped wheat exemptions entirely for the 2004 season, producers feel they can market their own product to their own best advantage. The question is why haven’t they been able to do this all along. Open desk is obviously a tremendous shot in the arm for wheat growers in Ontario.”

Hayhoe says Hayhoe Mills hasn’t bought “even a bushel” of wheat from the Ontario Wheat Board since the markets opened up. “It’s a free country,” says Hayhoe. “Why shouldn’t wheat farmers sell their product where they want? There are lots of choices in every area of life in Canada. Why should selling wheat be any different?”

He says that in terms of his business, he has gotten better service, better quality grain, and the logistics of keeping the mill supplied are much better. “I freely support all provinces that want to go to the open market system for wheat.”

Hayhoe’s advice for Alberta: “Do it and do it very fast. Don’t hesitate. Grain marketing is about assessing value and assigning it to scarce resources. The market will react very fast and very positively. Bring the market forces to bear in Alberta.”

He also points out that the grain trade knows how to operate the system, and has had plenty of experience. “I hope that Alberta finds out very soon how much better operating in an open market system really is. I applaud them for wanting to institute change. They deserve the freedom to operate their own businesses to their best advantage.”

Peter Johnson
Cereals Specialist, Ontario Ministry of Agriculture and Food
Stratford, Ontario

Ontario Ministry of Agriculture and Food Cereals Specialist Peter Johnson works directly with Ontario wheat producers.

When asked for his opinion of the open marketing system in Ontario thus far, his energetic and enthusiastic response was: “AWESOME! Best thing that’s ever happened to Ontario wheat producers. It gave wheat growers a boost, it gave wheat acres a boost, and it increased profitability.”

Before open marketing, the Ontario Wheat Producers’ Marketing Board handled all the growers’ grain by default. “Now, they have to bid competitively,” says Johnson. “The result is more profit for growers. Hard to argue with a benefit like that.”

Johnson points to another big benefit of the open market system. Wheat producers in Ontario can harvest a wheat crop and get paid in full at the time they sell it.

“It’s the same benefit pulse and canola producers enjoy out west,” he says. “Now wheat producers can get paid right away. They don’t have to receive a payment on November 1, then sometimes wait as long as 18 months for the final payment. Their whole perception of wheat production has changed.

“Believe me, when a wheat producer can get paid $160 per tonne and receives all of the payment at the time of delivery – well – it’s a good thing. Producers sit up and take notice when they know they can receive payment of $400 per acre [gross] at delivery.”

One result is that growers are now planting the types of wheat that local millers require for their end-use customers. This ability to gauge and respond to the supply chain resulted in a whole lot more acres of wheat planted in the fall of 2003.

With a poor fall planting season, anticipated acreage was only 550,000 to 600,000 acres. However, with the new interest in wheat generated by the open market, Johnson estimates that a whopping 750,000 to 800,000 acres were planted last fall, despite the poor conditions.

“It shows just how fast producers react to the information they receive from local millers and grain companies. They’re only too happy to grow what the industry wants to buy – and plenty of it – when the price is right!”

Millers are dealing with the elevator system more and more, says Johnson. “They prefer to deal with 10 grain companies rather than 2,000 producer clients. The small and middle-size producers can still market through Cargill or Sask Wheat Pool or their local elevator companies. The point now is they have a choice, whether they’re big or small.”

Johnson thinks that some of the smaller wheat producers may choose to continue to use the Ontario Marketing Board. “Not all the smaller growers are interested in paying close attention to the marketplace. Some of those growers, I suspect, will continue to use the board.”

The board will undoubtedly have some challenges with the new open market system. “Before open marketing, the board was receiving 95 per cent of the wheat. Now that’s down to 25 per cent or less. 2004 is the first year of full production in an open market. It will be interesting to see how the numbers shake out this year as the wheat board becomes more aggressive in bidding for wheat.”

The evolving system in Ontario is already producing real benefits. Johnson’s advice for Alberta: “Go for it! You won’t regret it.”

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