Growers, both in Canada and the US are noting their prices are deeply discounted to the ‘out-market’
Stat Publishing states: “Widening spreads between grower bids and values obtained on inter-dealer and export markets (also know as out-markets) is a feature of both Canadian and U.S. markets.”
The report goes on to say: “There were reports during the week of Canadian growers seeing bids for new crop navy beans between $11 and $15/cwt. Cdn for those same beans trading at U.S. $875 ($39.70 US/cwt) on a C&F basis. Cranberry beans are quoted between $1100 and $1150 USD/MT ($51.00/cwt) delivered (CIF) main European ports.”
In some cases grower bids are so heavily discounted that growers are asking whether this is a properly functioning market.
Stat Publishing postulates: “…processors are making a clear statement that they are not interested in buying from growers unless the grower is desperate to turn beans into cash.”
The following is an op-ed (opinion editorial) from the desk of the Ontario Bean Producers’ Marketing Board on where the bean market finds itself today.
An alternate explanation would be that the market paradigm has changed. Dry Beans are no longer “The Adam Smith Market” we are accustomed to. There has been a consolidation throughout the value/supply chain. The market now has only a handful of end-users. Similarly the processor/dealer fraternity has shrunk and speculators that gave the market its liquidity have fled. We may have entered an era of a proprietary supply chain that is managed from the top down. Whether it is “lack of end user support”, lack of liquidity, and/or lack of price discovery transparency, one thing is certain. The rules have changed. End users don’t seem prepared to put their money into beans, processor dealers are managing risk and not using their lines of credit to buy beans. So growers need to shoulder the burden of ownership, which today means a discounted price. Yet all participants in the chain are under the illusion this is a functioning market that will at some point give ‘accurate’ and fair price signals.
Dry Beans have become a narrow based supply chain that is working from a dated ‘MO’ of out-waiting the grower until he becomes “desperate to turn beans into cash”.
The biofuel based commodity price boom may bring about a re-thinking by all the members of the value chain as to how to make dry beans a better and more ‘fair market’. A market where margins accrue to all participants and the disparity of “deeply discounted” grower prices narrows and disappears. A market where growers become the business partners of the end user, instead of the “goose that lays the golden egg”. Meanwhile we continue to delude ourselves that we have an Adam Smith market.
Click here to read the Stat Pub story. “World Bean Markets Hold Firm”