Download Collection III: Facilitating New Grain Export Channels -- Articles XXI-XXX
In the coming months we will press ahead with our core-mission with the same vigor as we have shown since the launch of our portal last Fall. Our Farm-Profile program and Platform-Development efforts will continue, still with the hope of introducing our new Trade-Facilitation platform before the end of this year, at least in the form of an advanced prototype for use by Prairie producers and overseas buyers alike.
In this coming quarter, you will see a slight course-correction in our efforts. Instead of weekly article-posts, we will switch to a bi-weekly schedule, 2 or 3 articles every month, mostly focused on trade-risks and logistics-challenges. Resources we save from writing articles will be devoted to the Trade-Forum and Social-Media. If funds become available for market-research, we have other standby resources to tap into.
Contract Facilitation: Recently we introduced an interim-initiative into our agenda: early contract-facilitation efforts to take advantage of prevailing global grain market conditions. As discussed in Article #29, this is a move on our part to capitalize on a short-term “window” to kick start direct-sales channels. This will not distract us from our development efforts to introduce the new platform by the end of this year, but will give us a chance to test the markets, though with modest expectations.
Russia-Ukraine War has thrown grain-markets into frenzy, prices skyrocketing with panic-buying in fear of supply-shortages. But more than general price inflation, we see an opportunity behind North American grain-prices lagging global trends. Bulk-traders are likely to try to buy at these low prices to capitalize on higher margins in world-markets, in turn giving producers an added incentive to reach out to export markets directly – thus, a short-term window to kick-start direct-sales initiatives.
Rather than taking an opportunistic path ridden with trade-risks, we intend to pursue a cautious approach: focusing on select crop-domains and targeting reputable corporate-buyers. We will avoid one-off-sales that may hold the promise of higher-margins but also bring too many trade and fulfillment risks. We will stick to contract-sales that are sustainable with long-term growth prospects – no point starting our mission on a wrong-footing that will only hurt us in the long-term.
Trade Forum: We are now restructuring the Trade Forum on our portal (so far dormant) to kick-start this contract-facilitation process. This will be an early attempt to get the ball rolling, what we label our interim-initiative, but with a clear path to fold into our new platform structure. First, we will solicit producer input in selecting promising crop-domains, as we do not want to cast our net too widely at these early stages – we made some suggestion in this regard but will follow producer advice.
Second, we will ask participating producers to give us some visibility into their post-harvest stocks in each of the crop varieties we select. We know this is a sensitive issue, and nobody would want to publish this type of data, but this is very important in targeting buyers and bringing them to the table; thus, we offer a compromise. We are proposing to assemble and display only aggregate crop volumes, keeping the sources confidential, but remain open to any other suggestions producers may have.
Third, we will reach out to prospective buyers to post expressions of interest in the type of crops that may be available for direct-sales. Until this stage, there will not be any commitments from producers, price or volume wise. It will be up them to agree to connect with prospective buyers and pursue contract negotiations; we will be available to participate in these discussions in advisory capacities, but only if asked. To make it clear again, we have no commission interest in any trade we facilitate.
Social Media: We will try to drive interest and participation in our Trade Forum through social-media, like we do in promoting our article-posts. Over the last 9 months, we found that the most conducive platform for our mission is Facebook, where we have a Prairie Grain Portal page, with close to 100 dedicated members and 100s more followers who react to or comment on our posts. We will use this already established stage to get trade related discussions going on various topics.
We will make our intentions clear on Facebook: attract interest and participation in our Trade Forum with the hope of facilitating direct-sales contracts in the crop-domains that we select, in consultation with or on the advice of producers. Once our Trade Forum discussions gain momentum and we have clear indications of interest, we will initiate Facebook posts targeted at the initial corporate-buyers we have in mind across the Asia Pacific region – hopefully we’ll get there in a few months.
We will notify our Facebook followers once we have our prototype Trade Forum activated. We have a dedicated resource to manage both ends, who will not miss a beat on either in the way of producer comments or suggestions. Both sides of the debate will be fluid and dynamic, changing and adapting to ideas coming from our followers – we are committed to making this structure work, but we hope you realize that nothing can be accomplished without collaboration on your part.
In the above couple pages, we tried to outline our interim-initiative, contract-facilitation, that will take place on the Trade Forum on our portal but driven by our Facebook-page. Now let us also briefly outline the articles we plan to post in the next couple of months, less frequently than before but still 2-3 every month. We will select the topics or themes that will shed light on our interim contract-facilitation efforts, but here let us cite two that are on top of producers’ concerns: Trade Risks (perceived or real) and Logistics Challenges (grain-handling and container-supply).
Trade Risk Perceptions: In Article #30 we talked about trade-risks associated with direct-sales to overseas markets. This is partly due to fear-mongering on the part of grain companies who have a vested-interest in buying what they can to consolidate in bulk, rather than see anything sold directly to end-users, in North American or overseas markets. But also, there is a fear-of-the-unknown on the part of producers who have no experience in or familiarity with selling direct to overseas buyers.
There is nothing we can do, or care to do about the fear-mongering aspect, but we can deal with producer-fears over selling directly to overseas importers, if they are reputable corporate entities. We addressed this in our last article, how to negotiate contracts that ensure payment in advance of releasing shipments, a routine trading-practice between contracting parties from different legal jurisdictions, at least until they develop the necessary trust in each other to have more flexible arrangements.
We will continue to deal with these matters concerning direct-sales, which are commonplace in domestic and transborder grain-trades but not to overseas. The only difference between overseas exports and sales across North America is that the latter are executed through truck or rail deliveries, while the former involve containers, not a material difference. All other trade-risks can be dealt with through contractual remedies, and the residual-risks covered through export-insurance.
Logistics Challenges: Most grains require handling – cleaning, grading, even further processing – before they are delivered to end-users. Grain companies that are into bulk-consolidation often take these chores on, but we also know that direct-sales are common in domestic and transborder trades and require similar handling functions. Again, either the buyers take these functions on, or service-providers get involved to shoulder them, or producers set up the necessary facilities on their own properties.
What is so different in direct-sales to overseas? The buyers are far removed from production-sources to get involved in grain handling; these chores are going to fall on sellers to arrange on their own premises or through third-party service-providers. Also, these sales are going to be containerized, requiring container-loading, and in most cases also bagging, which are simple enough chores to be added to the grain-handling to-do-list. But none of these can be regarded impediments to direct-sales.
The container-supply challenge is a matter that requires close attention, but as we claim in many of our writings, is not something that cannot be overcome, provided volumes are there and lead-logistics-providers work closely with the shipping-lines to pull containers inland and ensure their timely return to port locations. We tried to deal with these challenges in previous posts, but perhaps too generally to convince producers that they are not insurmountable problems. We will be paying more attention to these issues in upcoming articles with more operational details.