Canadian government moves to dismantle the Wheat Board

Posted Oct 23, 2011 by Andrew Reeves
The Canadian government has moved this past week to dismantle the Canadian Wheat Board in an effort to remove what the Conservatives perceive to be a monopoly on price-setting.
Canadian Prime Minister Stephen Harper tabled legislation last Tuesday to dismantle the Canadian Wheat Board, a federal producer marketing system for wheat and barley that has operated in Canada since 1935. The Conservatives hope that deregulation of the Canadian wheat and barley industry will end what they perceive to be the CWB's price-fixing.
Under the current system, all producers of wheat and barley deliver their product to a grain elevator throughout the year. They receive an initial payment from the Wheat Board that is guaranteed by the federal government which represents a percentage of what the CWB estimates their grain will fetch on the market. The CWB then acts as a single-desk marketer for all grain manufacturers in Canada, working to ensure the best price possible is found for all farmers.
In the new free-market system, which is set to be in place by August, 2012, the CWB would be removed as a needless middle-man, a regulator in the eyes of the Conservatives that keeps entrepreneurial farmers from selling their product directly to buyers. The buyers, in most cases, tend to be large, U.S.-based agricultural multi-nationals.
“An open market will increase the number of buyers bidding on our wheat and barley,” Agriculture Minister Gerry Ritz reported in the Globe and Mail. “Unlike what some people may claim, the sky will not fall in an open market. Instead, the sky will be the limit.”
Mayo Schmidt, the chief executive of Viterra Inc., the largest grain handler in Canada, agrees with Ritz that access to an open market will benefit farmers. "I'm sure and hopeful that they will add value, and will be given every opportunity to do that, and thrive as a commercial enterprise here in Canada," Schmidt said in an interview with Reuters, reported in the Edmonton Journal.
But many farmers argue that the move to dismantle to board does not reflect the wishes of a majority of farmers in Western Canada. According to the Globe and Mail, "the measure is divisive. A Wheat Board plebiscite recently showed 62 per cent of wheat farmers voted to stick with single desk monopoly sales, as did 51 per cent of barley producers."
Pro-Wheat Board rallies are being held in major cities across the Prairies as farmers are coming out to show the government that while some farmers may take advantage of the opportunity to sell directly to consumers, the regulation that the CWB has kept in place has kept many farmers in business.
Bill Gehl operates a 4,000 acre family farm in Southern Saskatchewan. He recently sat down with the Globe and Mail to talk about the impact that the CWB's closing will have on how he does business. Gehl argued that "the Wheat Board gives farmers clout both in world markets, where it can push for higher prices, and in Canada, where it negotiates freight rates with Canada’s two railways."
Mr. Gehl did note that he is capable of marketing his own wheat, but with everything else that goes into modern agriculture, if there are 400 bureaucrats working in Winnipeg, Manitoba who can do it for him and every other farmer, and likely do a better job of it, why should he?
“Just because someone has a computer and a BlackBerry doesn’t mean they can market their own grain,” Gehl notes. “At that point, I am just a price taker.”
And its not just farmers concerned about job loss. The CBC recently reported on the dependence that the Port of Churchill, Manitoba has on the Wheat Board to keep grain flowing through the northern port.
Marc Cool, vice president of terminal operations for Omnitrax Canada, the company which operates the port, argues that “eighty-five per cent of [our] cargo volume comes from one customer. Nobody knows how this whole grain operation and the Canadian Wheat Board's single desk dismantling is going to happen and what the end result will play."
Others are happy with the decision to allow farmers to sell direct to customers. Delays in payments from the Wheat Board, competition from other cash crops, and market fluctuations have led some farmers like Norman Shoemaker, another Southern Saskatchewan farmer, to rejoice in the governments decision. “Farmers are going to be in charge of their own destiny,” Shoemaker told the Globe.
The move is sure to cause some farmers to call it quits, although the lack of regulations may also entice new farmers into the business. The move also has definitive political undertones, keeping in mind the Conservatives dislike of government regulation in areas they feel the free market will suffice. Harper does run the risk of alienating many of his core supporters in the West with his decision to dismantle the board above the wishes of a majority of farmer-members, although it appears to be a move the Prime Minister is willing to take in the name of deregulation.
The move will have major repercussions for barley and wheat farmers in Canada. But the long-term impacts of the decision will not be known for many years.