An interview with the Frontier Centre For Public Policy;
FC: You’ve expressed reservations about “relying too much on economists.” Don’t competent economists use real-world numbers? Shouldn’t we distinguish between good economists and poor ones?
JD: What I don’t like about econometric models is that they can’t be relied upon to take into consideration every possible influence or impact on the issues being studied. For example, no economic model addressing the market power of the CWB’s single desk has ever taken into consideration the fact that the single desk is operated by people. People who, as bright and dedicated as they are, make mistakes and poor judgment calls, use poor timing or simply miss the odd phone call.
The Recent U. of S. study uses real data to build an economic model based on market elasticities. This study tells in theory what the prices in different markets should be based on a single-desk seller and then in a multiple-seller environment. But for the CWB salespeople to act in the manner theorized, they would need to have complete and perfect information about every market they are selling into, every competitor and their possible behaviour, every possible substitution and every price elasticity of demand in every market. At all times. That is the only way the model works.
In addition, these models don’t consider things like the application of higher grades of grain in satisfaction of a sale of lower grades; this happens from time to time, yet I have not seen an economic model that considers it. Don’t get me wrong – economists do great work. Unfortunately, the CWB relies on these theoretical constructs to prove its worth instead of using real business measurements that are easily calculated. Even their benchmarking exercise was shown to be flawed.
FC: A dual market already exists in domestic feed barley, with only 20 percent of all Western Canadian barley going through the Board. Does that mean our system is better prepared for free barley than for free wheat?
JD: Absolutely. Many in this business – on both sides of the debate – acknowledge that barley is different than wheat. I would say that the time for the barley market to be free of the controls of the CWB came some time ago.
FC: The numbers you present show farmer costs for marketing canola, a non-Board crop, at roughly $40 a tonne. But Board costs for wheat come in at around $58, barley is estimated at $60 and durum at $70. That tells quite a tale about Wheat Board efficiency. Why are the Board’s services so much more expensive?
JD: There are three main factors here. First, much of what the CWB does is redundant. The grain companies market non-CWB grains to earn an elevation. The CWB markets wheat and barley at a cost, but also pay the grain companies for terminal handling and storage while grain companies also charge farmers for country elevation and cleaning. Second, the handling charges by the grain companies are greater on CWB grains than they are on non-CWB grains such as canola because they don’t have the same operational and marketing tools available to manage their space on CWB grains. And third, any costs incurred by the CWB making mistakes are passed onto the farmer. If a grain company makes a mistake, competition does not allow them to recoup the losses through charging farmers more or paying them less.
You can read the rest here.
Great reading Kate
I think he has hit the nail on the head.
OT
Masri injured.
http://carnivorousconservative.typepad.com/
So.. You are trying to sell me on off in the wheatboard by telling me that:
a) models are bad, studies are good. Yes I agree, but while studies of the past offer good data the future seldom creates the exact same circumstances…. Which makes studies not much better.
b) Sometimes like other grain companies the CWB sells the grain for a higher grade than they bought it for? Know what? If it is a private company they pocket that profit, the CWB kicks it into the pool and you realize a few pennies of benefit alog with everyone else.
c) costs of mistakes in marketing by the CWB are passed onto the farmer. Here’s a newsflash: The CWB hedges just like the grain companies do. You sell a contract, turn around use the fax machine and buy a contract. While competition removes some of what can be recouped you do not see every price out there exactly the same (even at gas stations) Companies DO recoup some losses for mistakes they have made.
I think it’ll take more than a 50-50 bad interview to convince me that I will get a better price by selling to an open market.
Studies about wonderful, hidden, “if-we-could-just-show-them-to-you” prices the CWB gets, are irrelevant to producers incomes. All the CWB is trying to do is distract farmer’s attention from what they actually pay farmers. That’s really the only important number, and when CWB Directors Ritter and Flaman only had farmgate prices, before they got onto the CWB payrole, they too wanted marketing choice.
Consistently the open domestic feed grain market outdoes the CWB even though the domestic open market is handicaped by export restrictions.
One of the inherent problems of modeling any thing is that the more complex the model gets the easier it gets to overlook components. It’s counter intuitive but with many inputs into a system one small thing can have a completely unforeseen effect.
Usually due to a cascade of events that were not predictable.
That’s where a lot of economic or other forecasts go wrong!
Barcs:
We need to have a beer.
The Frontier Centre For Public Policy: Another right-wing think tank promoting “unbiased” opinions or studies.
This is a great interview. Must reading for anyone voting in the barley plebiscite.
His explanation of how the board drives down prices of all crops in western Canada is bang on. Especially this year, guys could have easily been selling wheat at all time record highs this past harvest but had to sell canola for below average if they needed to pay the bills.
Vote Choice
I think it’ll take more than a 50-50 bad interview to convince me that I will get a better price by selling to an open market.
It’s not about your choice. It’s about whether you have the right to point a gun at other farmers’ heads and force them to follow your decision. You may have the “legal” right but you certainly don’t have the moral right.
Well said Justzumgai.
And they don’t have the economic or monetary argument either, that they claim trumps the moral argument.
“moral right”, or “moral argument.”
What is a moral argument??
Do you think a muslim, a buddist, a christian a wiccan and an athiest would give you the same answer?
Why do you expect everyone to have the exact same morales as you do?? Should I carry the same likes, dislikes and priorities as you too??
Here’s the moral “right” on this “argument”, Barcs:
You have no bloody right to tell my family how they must sell their product. If you insist that you do, we’ll certainly be having an argument, possibly also bloody.
Okay Barcs, I’ll bite.
You point out to us which one these: Muslim, Buddist, Christian, Wiccan and Athiest, in their moral code specifically condone someone taking what isn’t there’s. Better yet which one not only condones it but holds it up as a moral virtue.
As a wise woman once said ‘morality ends where the gun begins’.
We’re not talking about who likes chocolate ice cream better than strawberry here, don’t pretend that we are.
Still waiting Barcs.
All BARC and no bite…