XL - Farmer's Conundrum: How To Escape The Margin-Squeeze




As part of our interim trade-facilitation efforts, we had identified four priority areas. With our last two articles, we addressed malting-barley and specialty-wheat; we will get to the other two, cereal-mixes and feed-mixes, in the coming weeks. As we were closing our 4th volume of articles, we thought we would pause and reflect on our first year online with this information-portal, and our plans going forward, which will be a transition from this interim phase to our new trade-platform, Prairie Grain Mall.


The fundamental problem we are trying to fix is the margin-squeeze producers suffer exporting overseas through bulk-channels. Their hands are tied, as they are captive to these channels, and they must export their surplus – they produce twice what can be consumed domestically or sold to the US. The most effective way to alleviate this margin-squeeze is to open direct-sales channels, like the ones across North America but fulfilled in containers instead of trucks or railcars. These channels will not only free producers from their captivity to bulk-channels but also yield higher margins.


When we first embarked on this initiative, we had sensed considerable skepticism about the viability of containerized exports through direct-sales. Part of it was historical-conditioning, in the belief that bulk-systems were the only and most cost-effective way of exporting grains overseas. But we have since managed to overcome much of the resistance by showing how container-supply problems could be solved, and more importantly, how trade-risks could be avoided by farm-gate payments.


With the progress we have made in the last year, our following growing and their engagement deepening, we now feel that the “validation” of our mission has been accomplished, and we are on to the “execution” phase. Our existing information-portal was not suitable, at least inadequate, for this purpose; thus, we had designed a new platform, the Prairie Grain Mall, a virtual-marketplace foreign buyers could visit online to get to know the virtues of the Prairie grain-economy and be exposed to production-sources where they could procure a huge variety of quality crops.


In the meantime, a tragic war had broken out with Russia invading Ukraine, posing significant risks to global grain supply. Ironically, we saw a window of opportunity behind this travesty with pent up demand for grains at high prices, but only bulk-traders were going to benefit from this tragic twist of events. Rather than waiting for our new platform, we rushed into a phase we called interim-trade-facilitation to cultivate direct-export opportunities that could yield higher margins for producers.


We are pursuing these opportunities by reaching out to overseas buyers directly, but we can