Cargill may run a pool for western Canadian farmers’ spring wheat in 2012 and will also be ready to offer farmers forward price contracts for their grains in an open market, the president of the company’s Canadian division said on Thursday.
If a government bill to strip the Canadian Wheat Board of its monopoly as of August 2012 becomes law next month, grain handlers will be able to immediately offer farmers contracts to buy next year’s harvest.
Farmers in Western Canada currently must sell wheat and barley for milling or export through the CWB, but Ottawa’s bill would set up a free-for-all among grain handlers to buy the region’s prized grain, well before farmers even plant next year’s crop.
Read Also
U.S. grains: Wheat futures rise on supply snags in top-exporter Russia
U.S. wheat futures closed higher on Thursday on concerns over the limited availability of supplies for export in Russia, analysts said.
"We have considered all of those particular (pricing) approaches," Cargill president Len Penner told reporters after speaking to the Winnipeg Chamber of Commerce. "Part of what we need to assess is what role will (the CWB) play on the pooling side versus what other competitors will choose to do."
Penner said he thinks farmers will want to pool wheat, as they have in Australia after it ended its own wheat marketing monopoly in 2008.
The CWB may continue operating in the open market, albeit on a smaller scale without its monopoly.
The number of pooling options Cargill may offer depends on how much demand there is for them, Penner said.
Pooling options come in different styles and can allow farmers to capture the average price of a commodity over a period of time, or simply turn a combined grain volume over to a company for marketing during a year.
Cargill, the third-largest grain handler in Canada after Viterra and Richardson International, is also "very prepared" to offer farmers forward price contracts for next autumn’s harvest, Penner said.
What remains to be seen is how willing farmers will be to lock in wheat prices early in the new year, after six decades of selling wheat through a single marketer.
"It’s not the industry that signs up the contracts, it’s the farmer," Penner said.
In a given year, farmers may sell about one-quarter of yearly production of other crops through forward contracts, and the signup for wheat might be slower, Penner said.
