Hey there, time traveller!
This article was published 6/5/2011 (3185 days ago), so information in it may no longer be current.
The allure of the U.S. market has perhaps been the biggest driver in the campaign to end the Canadian Wheat Board's monopoly.
But unless they tread lightly, it could be one of the first markets Canadian farmers lose after the federal Conservatives make good on their election promise.
Southern Prairie farmers have fumed for years over the difference between U.S. spot market prices and the CWB pool prices, which are an average of sales made to customers in 70 or so countries throughout the year.
As things are now, farmers can't legally haul to a U.S. elevator. They must sell their wheat through the board, which does the marketing direct to U.S. processors as it does with customers elsewhere. Farmers have the option of buying their grain back from the pool and then selling into the United States, but most find doing the paperwork too bothersome.
U.S. exports, currently at two million tonnes for wheat and durum and 600,000 tonnes for malting barley, are about one-tenth of Canada's total sales. Not surprisingly, spot prices on a given day are often higher than average prices from all sales to all customers over a year.
Many farmers think that if freed of the pooling system, they could simply sell everything to the United States. In an open market, they would be free to try.
Here's the catch. Long lines of Canadian grain trucks at northern U.S. grain elevators will be about as welcome as a snowstorm in May — especially if those deliveries plug up the pipeline or have an effect on prices, either real or perceived. Just ask softwood lumber, cattle and hog producers. A trade backlash that makes crossing the border prohibitively expensive is almost inevitable.
The Canadian Wheat Board has spent nearly $18 million fighting 14 trade cases with the United States since the implementation of the Canada-U.S. Trade Agreement, which supposedly secured Canadian access. Under a voluntary CWB, the task of taking on U.S. trade law will fall to commodity groups and taxpayers through federal and provincial governments.
The unfortunate reality about the so-called "Canadian Wheat Board debate" is that virtually all of the rhetoric has centred on the merits of the single desk. The often-bitter arguments have waffled between the economics, whether farmers do better by pooling their grain and sharing the average proceeds, and the philosophical, whether private entrepreneurs should be forced to market collectively.
Very little discussion has taken place over the board's other roles and who will step into them once the board no longer represents all wheat, durum and barley growers. Many assume a voluntary board will continue to carry out the same market development, research and customer-service functions, but with little consideration as to how it would do that, or why.
Farmers, through the Canadian Wheat Board, are the biggest private-sector investors in wheat and barley research in Canada. They pay a checkoff on sales that raises about $6 million annually for varietal development through the Western Grains Research Foundation.
That will change, perhaps even disappear, under a voluntary board. Why would remaining board supporters continue to shoulder the costs of research that also benefits their competition in an open market?
The Canadian Wheat Board is one of the founders and major clients of the Canadian International Grains Institute (CIGI), which offers technical support and training to Canada's customers. Other commodities and other countries have market development agencies too, such as the largely government-funded U.S. Wheat Associates. But while it travels the world cheerleading for U.S. wheat, it has no direct relationship with customers.
The Canadian approach for wheat, durum and barley is customer specific and unparalleled. It has played a key role in branding Canadian wheat as the best in the world. And it's cheap, costing about half of one per cent of the CWB's total sales.
If CIGI, which is financed through matching contributions from industry and government, loses the CWB's contribution, it loses 60 per cent of its funding. Who fills the gap and how?
For as long as it exists, a voluntary board will only be working for the farmers who continue to use it. With no physical assets, its access to capital will be limited. So will its ability to provide initial payments in pool accounts. It's not reasonable for the federal government to continue guaranteeing initial prices, because the board will be in direct competition with private trade. This has implications, not only for farmers but for its 400 employees, and downtown Winnipeg.
The debate over the future of the Canadian Wheat Board ended May 2. Farmers will be freed from single-desk selling. But ending the monopoly is the easy part. It's what comes afterwards that gets complicated.
Laura Rance is editor of the Manitoba Co-operator. She can be reached at 792—4382 or by email: firstname.lastname@example.org.
Laura Rance is editorial director at Farm Business Communications.