Wheat board finished but battles rage on

Hey there, time traveller!
This article was published 23/06/2012 (5091 days ago), so information in it may no longer be current.

With last week’s Federal Court of Appeal ruling in favour of the federal government, you could say it’s all over but the crying in the Canadian Wheat Board saga.

But that assessment would be premature — for two reasons.

Firstly, there are legal challenges outstanding. Pro-wheat board campaigners have the option of seeking leave to appeal to the Supreme Court of Canada, and they are still considering that option. As well, there remains a $17-billion lawsuit on the books seeking compensation on behalf of farmers for lost assets and income.

What isn’t in doubt at this point is the Canadian Wheat Board, as farmers have known it, is finished. What was once the largest single exporter of grains on the planet is now on life-support, with most of its capacity to function gone along with more than three-quarters of its human capital. Taxpayers will subsidize it for the next five years and in all likelihood it will disappear once the federal government pulls the plug for good.

That brings us to the second reason this isn’t over yet. It would appear the only thing evaporating faster than the board are the promised benefits accruing from its demise.

Remember the much-touted pasta plant announced in Regina last fall as a sign of value-added processing to come once the CWB’s monopoly was out of the way? Poof!

Alliance Grain Traders, the company that had Prime Minister Stephen Harper on hand to announce the $50-million plant, has since put the project on hold while it monitors developments in the North American grain industry and focuses on improving its balance sheet.

Remember all of that talk about the new CWB working hand in hand with grain companies so farmers would have the option of continuing to pool their grain for marketing or selling directly through grain companies?

To make that happen, the board, which owns no elevators, must work out access-to-handling agreements with each grain company with which it is now competing.

With barely a month to go before the start of the crop year, it finally announced last week it has reached deals with several grain handlers, including the largest and third-largest on the Prairies.

The agreements were a necessity for the new board to make a credible pitch for farmers’ grain, and getting them into place was a significant achievement. Grain companies will be happy to have the handling fees for board grain, but they are understandably reluctant to have a government-backed organization competing with them in the cash grain market and potentially offering a higher price than their own. Therefore, the agreements so far are for “pooled” grain, with the farmer receiving a below-market initial payment up front and the rest later, depending on how well the board does in the pool period.

Whether farmers will sign up for the pools is another matter. Wheat prices have been stronger lately, and experiences with voluntary pools show producers are less interested in an average price in a rising market than when it is dropping.

So far, interest has been lacklustre, partly because of the lack of handling deals and partly because farmers are just waiting to see how things play out. The problem is, without a firm grip on how much grain it will have in its pools, the board can’t start marketing. Nor can it book handling capacity with its grain-industry partners.

Of course, whether farmers sell through the new CWB matters not if the new environment means they are getting higher prices. After all, they have been told the end of the board’s monopoly will increase competition. The outstanding question is, for whom?

A recent Reuters report quoted the head buyer for Barilla pasta in Europe, who predicts the prices he pays for durum will decline with the end of the CWB monopoly. Under the single-desk system, the board controlled all of the durum stocks coming out of Western Canada, which accounts for half of the export supply worldwide.

The end of the monopoly will mean more sellers competing for his business and a better opportunity to manage inventory, said Emilio Ferrari.

Farmers were also told they’d be able to move their entire crop off the combine in the fall and never have to start up an auger in January again, a suggestion a CP Rail executive dashed with a “no” when the question was put to him last April.

The CWB is done. But Round 2 of the debate is just beginning.

Laura Rance is editor of the Manitoba Co-operator. She can be reached at 792 – 4382 or by email: laura@fbcpublishing.com .