Canadian Wheat Board Directors Interested in Power, not Farmers

Commentary, Marketing Boards, Rolf Penner

Despite all evidence to the contrary, a slim majority of Canadian Wheat Board (CWB) directors continue to claim that the government legislated monopoly puts more money into farmers’ pockets than they would otherwise receive in a competitive marketplace. Real world, back-to-the-farm-gate price comparisons have repeatedly shown this is, in fact, not the case.

The Frontier Centre for Public policy has recently released a report titled ‘CWB Price Premium a Myth,” which shows once again that the prices U.S. farmers get from private grain companies are substantially higher than what Canadian producers are allowed to receive under the Canadian monopoly system. On June 14, Alton Grain Terminal in Bottineau, North Dakota, was offering $6.10 (Canadian) a bushel for spring wheat, while 47 miles north in Boissevain, Manitoba, the best a farmer could get from the Wheat Board through its fixed price contract was $5.10.

For every 500 acres of spring wheat grown, this translates into a $20,000 loss if you assume an average Canadian yield of 40 bushels per acre, although Manitoba wheat crops regularly exceed the 50-bushel mark. With even small family farms running thousands of acres, the economic impact of this kind of loss is substantial. Forcing farmers to accept lower returns than what is otherwise available puts them at a real competitive disadvantage in the global arena.

According to statistics Canada, 17 million acres of spring wheat went in the ground in the three Prairie Provinces. The Frontier report shows that the range of economic loss runs from a minimum of $585 million, when comparing the Board’s fixed price contract to the U.S. price, all the way up to a staggering $1.2 billion, when looking at the more commonly used CWB pool price, a yearly price averaging option.

The CWB’s pricing of Canadian wheat for well under market value to make sales is one of the reasons for the difference. A recent Reuters news item clearly makes the point. It reported that millers in northeast Brazil received an 82-cent per bushel discount in early June. Lawrence Pih, president of Moinho Pacifico, said, “They paid $190 per tonne two weeks ago when the price was $222 per tonne FOB.” Another reason is the higher costs associated with Canada’s single desk seller. One example of this comes from the federal grain monitor, which shows $20-$30 per tonne higher costs for handling Board grains than for handling free market canola.

CWB directors point to a select few so-called independent studies to back up their claims. They fail to mention the Canadian Wheat Board paid for these studies. This obviously disqualifies them as independent. Furthermore, they do not go back to the farm gate, and they use a completely unverifiable, secret database no one else may see. The Frontier report, on the other hand, is instantly verifiable through Web links that go straight back to the original sources and show in a straightforward, easy to understand manner what farmers would receive in an open market environment.

The handful of directors who regularly makes these deceiving and erroneous economic claims about wheat also make them about barley. This is how they rationalize spending hundreds of thousands of dollars of farmers’ money on a court challenge to block the federal government’s plan to give producers marketing choice in barley. The directors are ignoring the expressed wish of the 62% of barley growers who represent 70% of the acres grown who voted in favour of choice in the recent producer plebiscite, the 58% from their own 2007 survey who believe competition would lead to better services and the 54% who believe that it will lead to higher prices.

It is clear these directors are not interested in farmers’ rights to their property, the collective voice of farmers, or in doing what is in the best financial interest of producers. They appear to be driven by an unwavering commitment to the notion they alone know what is best for all farmers, and they are willing to say and do anything to preserve their positions of power and control. The federal government is right in wanting to end this charade by putting that control back where it belongs – in farmers’ hands.