Rolf Penner responds to CWB Chair’s column

Media Appearances, Marketing Boards, Rolf Penner

Following is the viewpoint of the writer, chair of the Canadian Wheat Board’s board of directors that was published in the Saskatoon Star Phoenix. Rolf Penner’s response is in bold text.

Rolf Penner, the author of Wheat board’s price premium simply a myth (SP, July 6), is a Manitoba farmer and he does work for the Frontier Centre for Public Policy.

He has made it clear on a number of occasions that he does not believe that single-desk selling of wheat and barley through the CWB is in the best interests of farmers.

He also has made it clear that he thinks comparing a cash price for grain at one elevator in North Dakota to prices available through the CWB and then extrapolating that to the whole Prairie crop for the entire crop year is more objective and meaningful than studies conducted by internationally recognized agricultural economists such as Daryl Kraft, Murray Fulton and Richard Gray.

Rolf Penner- You do not need a PhD to understand whether the CWB gets farmers higher returns than they would be able to get on their own. Mr. Ritter thinks that you do, both he and the CWB prefer studies and analysis that they pay for, done with unverifiable secret data sets, and econometric models that don’t account for the costs of imposing a rigid marketing regime on farmers and that don’t even attempt to get at the farm gate return. In short, they prefer analysis that muddies the water to make it appear deep, when in reality – the truth lies in straightforward price comparisons. It is the intention of the Frontier Centre to continue making such comparisons and bring the evidence forward.

What’s more, Penner appears to believe that farmers such as me, who are elected to represent grain producers’ financial interests around the CWB’s board table, are quite satisfied to see our grain sold at below market values both here at home and abroad.

Penner, of course, is entitled to that opinion.

But it is clear from the results of CWB director elections that his views are not shared by most grain producers in Western Canada.

Ever since the farmer-controlled board of directors was put in place to oversee the CWB’s operations, farmers consistently have elected eight out of a possible 10 directors who support single-desk selling and who believe the CWB, with its current powers, can get the most money for our grain.

This is no “slim majority” as Penner calls it.

Rolf Penner- Wheat board directors like to talk about how they are representing farmers but one needs to keep in mind that there are a lot of non-farmers who vote for those directors. Hobby farmers, retired farmers, and landlords are amongst the permit book holders who are allowed to vote. At the same time, there is a large number of bona-fide farmers who make their living from the land who for various reasons are not permit book holders and do not get a chance to vote. The federal barley plebiscite on the other hand was open to all growers of barley not just a particular segment as is the case with director elections and as such is far more representative of the farming community at large.

The truth is that a majority of farmers just don’t buy the Frontier Centre’s arguments.

Rolf Penner- Take a look at the barley plebiscite results, 62% of barley growers agreed with us, and the result is identical to the CWB farmer survey results released both before and after the plebiscite. The latest CWB farmer survey also shows that 58% agree with us that competition would lead to better services, 54% agree that it would lead to higher prices, the majority of farmers do ‘buy’ our arguments. And they should, the CWB has been underperforming for years.

They know from experience and from basic common sense that you have a lot more clout in the market place if you’re selling 20 million tonnes of grain through the CWB than if you’re selling 2 000 tonnes on your own.

Rolf Penner- While in theory this is correct, the CWB’s sales performance speaks volumes and real life price comparisons have shown that they do not have the marketing ‘clout’ they think they have. Rather than going out and hustling for sales they sit back and wait for buyers or the accredited exporters, who sell 50% of the wheat and 80% of the barley, to call. CWB sales are lower than crop year averages and their costs are higher than that of the private trade.

They know that on any given day, a cash price at one American elevator can be higher than what is available on the Canadian side of the border, but that you can’t make an assessment of marketing systems based on that.

Rolf Penner- Actually you can, those US elevators have a direct link to the world market. The US exports wheat and reflected in the bids made to ND farmers are world values. The prices offered are not just a local US price, but are competitive with the global market, worked back to that particular location. Moreover, the ‘one’ price in my report mirrors what farmers across the prairies are seeing on a day-to-day basis and have been seeing for many years and when one looks at those ‘any-given-day’ prices over an entire crop year they show a better average price than the CWB.

Cash prices change daily. There are freight costs associated with going to the U.S. that make it prohibitive for many farmers to ship their grain south.

As well, what would U.S. elevator values be if western Canadian wheat and barley moved across the border without restriction?

Rolf Penner- Exactly what restrictions are in place now? Is chairman Ritter leading us to believe that the CWB is deliberately “restricting” sales into this high priced market? That would certainly help to explain the lower returns coming back to Canadian farmers.

The argument that Canadian grain would ‘swamp’ the US marketplace, if the CWB were opened up to competition, and drive prices down is an old and well-refuted one. There is only so much wheat in the world, competition for the CWB would not change that, what would change is that Canadian farmers would finally have access to higher world prices, the kind farmers in North Dakota enjoy every day. It is not that Canadian grain would migrate south but that higher prices would move north.

One also needs to consider, in all this, the way in which CWB sales secrecy keeps a lid on prices. If someone wants to purchase a large amount of grain without creating a ripple in the marketplace the CWB is the way to go, precisely because it does not have to compete for farmers’ grain. When any other company in an open market environment is looking to purchase grain, particularly large volumes of it, the marketplace knows immediately through offsetting trades done on either a cash basis or the futures exchanges and reacts accordingly by raising prices to reflect buying interest supporting prices. That does not happen with CWB sales. Because there are no offsetting trades, there is no transparency in the marketplace and farmers miss out, on demand driven rallies.

Opening the board up to competition and removing this ‘restriction’ from the marketplace would change that and that change would be a positive one for Canadian farmers in that they would now be able to participate in these kinds of price rallies.

Prairie grain producers understand that grain markets are very complex and that there are no simple solutions to improving their returns from the marketplace for wheat and barley.

Rolf Penner- There is nothing complicated about allowing farmers to sell their crops to the highest bidder. It looks like Mr. Ritter has spent enough time working for the CWB that he has now picked up a fondness for complexity. Simplicity in and of itself does not invalidate an argument Mr. Ritter and farmers know that.

So far, a majority of them have chosen to elect representatives who, like them, want to proceed carefully in building on the strengths of the current CWB while adding options and greater flexibility.

If Penner is serious in his call to put control of wheat and barley marketing where it belongs — in the hands of farmers — he will stop advocating for government to intervene and impose its views on the grain sector without regard for the farmers’ democratically elected representatives.

Rolf Penner- The results of the federal plebiscite on barley speak for themselves. The majority of farmers, 62% of them, are in favour of marketing choice, and it is upon that view that the federal government is acting. Let us be clear about who is imposing what on whom here. As it currently stands farmers who sell their grain outside of Mr. Ritter’s wheat board system go to jail and many have. That is how Mr. Ritter seems to like it, his way or concrete walls and iron bars. It is Mr. Ritter and the CWB through the federal CWB act that has been imposing its collectivist ideology on –all- western Canadian farmers for over 50 years now. No one, not I, not the government, not one marketing choice supporter is advocating that those who wish to market their grain cooperatively should go to prison for doing so.

Though he seems to believe otherwise, being a democratically elected representative does not give Mr. Ritter or any other elected official the right to deny other people their rights to their property. That is not how democracy works in Canada or the rest of the free world for that matter. There is plenty of regard being given to Mr. Ritter and those who support him. Far more in fact than they are willing to give those who disagree with them and simply want to run their own businesses. The CWB would be free to carry on business as before. It would just have to do so, on a voluntary basis using the power of persuasion, rational arguments, and facts in the same way that ever other business does.

He can then show his commitment to democracy by trying to convince more farmers to vote for CWB directors who espouse his own and the Frontier Centre’s ideology.

He could even run for election himself.

Rolf Penner- I find it very ironic that Mr. Ritter believes that the only way that a farmer such as myself would be worthy enough to run his own farm, his own business, the way he sees fit, is after he has managed affairs for every other farmer in Western Canada first. As to my commitment to democracy, there is nothing in this world more democratic than the free market, buyers and sellers voluntarily getting together to conduct the business that is in their interest. The essence of the free market is democracy, that is what I am an advocate for, and that is what Mr. Ritter is trying to avoid, at all costs.