News last update:6 Aug 2012

Canadian wheat export monopoly staggers

Plans by the government to strip the Canadian Wheat Board of its monopoly control over most of the country's wheat and barley exports is stirring up a 40 year old discussion.

The wheat board, founded 75 years ago as part of a wave of cooperative ventures for improving farmers' lives, is now one of the world's largest grain traders, with annual sales of CAN$4 to $6 billion (US$3.4 - $5.15 billion).

The board is among the last of the cooperative projects that remains true to its original goals. But those goals now have little in common with the open market philosophy of the minority Conservative government that came to power just under a year ago. Shortly before Christmas, that clash resulted in an unusual cabinet order to fire the wheat board's president, Adrian Measner.

The fate of the board will be eagerly awaited in the United States, where farm groups have unsuccessfully challenged the Canadian board's monopoly. Among the companies likely to move into Canada's export market, if it is opened, are commercial grain traders like Cargill and Archer Daniels Midland.

Simple concept
The wheat board concept is simple. In exchange for its monopoly over wheat destined for export from Canada's three prairie provinces, as well as a small part of British Columbia, it pays every farmer the same average sale price. Overall price averaging has provided most farmers with greater stability and higher prices than they would have obtained in an open market.

A study commissioned by the wheat board on barley prices released in December gives more specifics. The report, by Richard S. Gray of the University of Saskatchewan, Andrew Schmitz of the University of Florida and Troy G. Schmitz at Arizona State University, concluded that farmers' barley revenue from the wheat board was 59 million Canadian dollars higher from 1995 to 2004 than it would have been in an open market system.

Wheat board supporters argue that the board also helps farmers by negotiating terms with railways and ports.

The system seems to have supporters on the buyers' side as well. It provides a more uniform grading of grains than is available in the United States, for instance.

But averaging prices has a significant drawback for some farmers. By definition, an average price is often lower than what individual farmers who live near the United States border could obtain by directly trucking their harvest south.

Chuck Strahl, the minister of agriculture, has repeatedly said that all he wants is to give farmers the choice of pooling their risk through the wheat board or going out on their own. "We are trying to get more marketing choice for farmers," he told the House of Commons in December. "We want to put more money in their pockets. We want them to take advantage of their own expertise."

Strahl has not found it easy to end the board's monopoly. A 1998 law gave farmers control of the board by letting them directly elect 10 of its 15 directors, with the balance, including the president, being appointed by the government.

Now Strahl plans a vote on creating an open barley market early in 2007. But he has also made it clear that the government will not be bound by its results.

Ken Ritter, a farmer from Saskatchewan who is the board's chairman, said the legal challenge of the government's orders will continue as will the board's campaign to keep the current system. "This is very, very divisive," Ritter said. "This has gone on for 40 years."

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