Price stability and marketing alternatives for grain corn in Manitoba
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Date
1981
Authors
Glenn, Marcia E.
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Abstract
While there have been large increases in grain corn production in Manitoba, there has been little or no investigation as to how a marketing system should develop to meet the needs of this expanding industry. It was the purpose of this study to first examine the characteristics of the Manitoba grain corn industry and second to use one of these characteristics, price stability, as a criterion for evaluating possible marketing mechanisms. While the first goal was dealt with quantitatively, the second stage was undertaken through the use of an analytical technique proposed by Schmitz et al. This tool determined the gains or losses accruing to producers under conditions of either price stability or instability. Upon determination of the type of pricing condition that would provide the greatest gain to producers, marketing alternatives were outlined that might achieve these various price conditions. Examination of some of the characteristics of the Manitoba grain corn industry, revealed several pertinent points. First, from a production standpoint there is room for considerable expansion in corn acreage and therefore supply. More importantly perhaps, is the analysis that indicated that there is equally as great a demand for the commodity... This price received by Manitoba producers is presently achieved in one of the four ways. The first is a simple producer to producer transaction with negotiated price. The second enables the producer to deliver to his primary elevator, for a daily price also determined from the CBT. Producers can also, either individually or as a part of the Manitoba Corn Growers Marketing Association, sell their crop to various feed mills in Manitoba, Alberta or B.C. These mills also quote prices based on Chicago prices, but these will vary between companies depending on the exchange differential and/or tariff benefit that is passed on to producers. The fourth outlet for corn is the distillery at Gimli, Manitoba. Calvert of Canada requires 50,800 tonnes of high quality corn annually, and if Manitoba producers are able to satisfy the specifications, they receive a price determined by Calvert, monthly. Possible marketing mechanisms were to be discussed after examining characteristics of an optimal pricing strategy... One of the combinations was considered for the illustration of a pricing strategy. The values of the parameters for this evaluation were chosed to represent an "average" Manitoba corn producer, and resulted in a negative one indicating that producers would be better off with price stability. The remaining point which was considered was the type of marketing mechanisms that exist and the corresponding price conditions that they would provide. There arose five alternatives: the Canadian Wheat Board with a pooled price, the Winnipeg Commodity Exchange with a variable price, together as a part of the Domestic Feed Grains Policy where a producer has the choice of pooled or open market price, the Manitoba Corn Growers Marketing Association with a transaction or pooled price and sales to the elevator companies for either a daily price or a pricing pool such as are presently operated for crops such as lentils.