For a Grain Boom, End the Monopoly

Agriculture, Frontier Centre, Marketing Boards, Regulation, Rural, Uncategorized, Worth A Look

Only a few months ago, the Canadian Wheat Board was rarely discussed outside Western Canada. Now, it looks set to become one of the top national political issues of 2007.

Debate about the wheat board’s usefulness and practices has been percolating for years, but, until now, it has been an inside issue affecting only Western Canada’s wheat and barley producers. Its emergence as a national issue with electoral repercussions stems from the Conservative government’s bold decision to seek to end the board’s marketing monopoly and allow Western farmers to sell their barley and wheat to whomever they choose.

Understandably, such a fundamental policy shift to a system that has been in place since the Second World War has attracted powerful advocates on both sides, dire warnings, and demonstrations. It even led to the replacement of the board’s president, Adrian Measner.

Because it is so controversial, the government?s continued commitment to bring about needed change in the face of strong entrenched interests should be seen as courageous, particularly given the government’s minority status in Parliament.

The Canadian Chamber of Commerce wouldn’t stop at calling it courageous — it is also long overdue. For a number of years, we have been urging reform because the board’s monopoly has become a net negative, stymying growth and innovation in the sector. And now that Ottawa has announced a plebiscite on the issue, starting first with barley growers, we urge voters to put fears aside and make the sound, economic choice.

Regardless of the wheat board’s utility in the past, it is difficult to see why there remain such strenuous objections to allowing farmers a choice between selling their products to the wheat board or, if they choose, to somebody else willing to pay. Already, wheat and barley farmers outside the Prairies are free to sell their grains to any buyers they choose. And Western farmers of other agricultural products have no such restriction placed on them.

The government’s path of reform is supported by many Western Canadian wheat and barley farmers, but, just as important, it is supported on the economic evidence. It should be remembered that the government is not proposing to destroy the wheat board, only to end its monopoly and make it one of several marketing options available to Western Canadian wheat and barley farmers.

Some argue that it is all or nothing — either the wheat board acts as the only option or there is no wheat board. However, experience here and abroad proves otherwise. Internationally, the Australian Wheat Board used to operate similarly to the Canadian version until Australia’s wheat and barley markets were deregulated 15 years ago. Yet, the Australian Wheat Board, in a somewhat different guise, remains and is one marketing option of many for Australian farmers.

Domestically, there are the prior examples of the removal of oats from the wheat board’s monopoly 15 years ago, as well as the recent transition in Ontario from a monopolistic to an open market for the marketing of wheat. Like the Australian Wheat Board, the Ontario Wheat Producers’ Marketing Board remains a viable and prominent marketing option today.

In each of these instances, the result for farmers was greater efficiency, more pricing options and more flexibility. It is estimated that Australian barley growers now earn 10% to 15% more than before deregulation.

Economically, ending the board’s monopoly should be a boon to the Western Canadian economy.

Numerous independent studies dispute the wheat board’s contention that it obtains a price premium on its sales of barley and wheat. Rather, they show the board’s monopoly actually damages the Western Canadian economy, restricting growth anywhere from $300-million to $1- billion each and every year.

Even the wheat board recognizes that growth in the value-added processing sector is important for stimulating economic activity. Yet the evidence shows that the board’s monopoly is hindering this kind of growth.

In Ontario, following the deregulation of the marketing of wheat, well over half the wheat grown in Ontario is processed in the province. By contrast, a minuscule percentage of the wheat grown in Western Canada — less than 6% — is processed there.

The George Morris Centre, an independent agri-food think-tank, has estimated that removing the marketing monopoly on wheat and barley could stimulate the growth of a grains-based, value-added industry that would be worth between $1.4-billion and $2.87-billion annually, creating between 10,000 to 20,000 new jobs.

The logic favours ending the wheat board’s monopoly. The underlying objection to reform is the fear of change, which, while a powerful factor in human affairs, is not a good reason for failing to move forward with an initiative that will in the long run help both the farmers involved and the economy in general.

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– Michael Murphy is executive vice-president of policy for the Canadian Chamber of Commerce.