Parrish and Heimbecker, a small western Canadian elevator company, which on the scale of the world grain trade would not qualify as a financier for the coffee fund of the four giants, has been blanketing the prairies with advertisements titled “Wanted your wheat” offering a twenty cent per bushel incentive if and only if the hapless farmer purchases the seed and chemicals, and commits to marketing their crop through the company’s elevators.

Not to disrespect a company but it was sheltered behind the seven decades long policy of the farmer controlled Canadian Wheat Board that made sure as many grain handlers and processors as possible survived in Canada.  This policy had nothing to do with farmer altruism or nationalism, it was simple self interest.  The single desk CWB was prohibited by law from having “retained earnings.”  This is a lawyerly way of saying they had to pass all the sales revenue back to farmers.  So the more companies the CWB had to deal with, the better for farmers.

Protein Spreads 02

Protein 11.5 to 13.5 percent – end of single desk, end of premiums

That is all gone now, along with the real premiums to farmers for high protein milling wheat and malt barley.  Hence the attempts by the smaller grain players, like P&H to secure grain handling from farmers by offering a premium less than half of the premium farmers got with our single desk.

Twenty cents a bushel is not much when you consider the end purchasers of the high protein wheat and malt barley are still likely paying those premiums, but now the money from the premiums stays with the processor or goes to the handling companies like P & H – assuming they have enough market power to extract any premiums at all.

For farmers it gets worse.  The P and H offer is a sign of things to come where other handling companies, Viterra with its ownership of ESSO fuel distribution comes to mind, may soon be exercising their own market power by requiring farmers to buy seed and chemicals from them and may be tempted to make it a requirement that fuel purchases also come from them.

Fuel trucks in Viterra yard

Fuel trucks in Viterra yard

Due to the huge trucking distances on the prairies, most farmers only have one or at best two elevator companies to choose from.  Thanks to the Harper and Ritz crowd the old song about owing your soul to the company store applies to the grain farmers now.

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