Producers’ Grain Marketing Decisions: A Study in the Canadian Markets

This paper investigates the dynamics in the decision-making process of producers in Western Canada, where they must market their crop through the Canadian Wheat Board(CWB). The CWB offers several marketing alternatives to producers, which provide distinct combinations of return, risk, and cash flow. Pool pricing is the default alternative in which the CWB markets the grain for producers, while Producer Payment Options (PPO) represent instruments that producers can use to price their grain by themselves through the CWB. Preliminary analysis of 13,335 producers suggests that there is great heterogeneity in individuals marketing behaviour and that almost all producers who use PPO contracts deliver part of their crop to the pool accounts. This suggests that pool pricing is still largely used as the main marketing alternative, although producers seem to respond to price signals provided by the CWB and futures markets. Additionally, no clear evidence that producers who use PPO contracts are able to consistently outperform the pool was found. There also appears to be no direct relationship between PPO usage and pricing performance, implying that the adoption of PPO contracts appears not to be related to better or worse marketing performance. However, this point still needs further investigation with the complete data set and estimation of the regression models adopted in this study.