Post-Monopoly CWB has Tough Job

Agriculture, Frontier Centre, Media Appearances, Rural, Uncategorized

With the clock ticking on the introduction of legislation that will end the Canadian Wheat Board's monopoly on marketing wheat and barley, it's becoming increasingly clear that whatever form a successor organization takes, it will have a tough go of it.

In a paper released Thursday by the Frontier Centre for Public Policy, University of Manitoba economist Milton Boyd concludes the end of the monopoly would likely produce benefits to farmers and the industry.

But the paper actually serves to bolster one of the key arguments Canadian Wheat Board officials have been making about the board's relative survival in the aftermath of the legislation.

That is — a post-monopoly CWB will be hard-pressed to deliver value-added service to Prairie farmers.

On several occasions federal agriculture minister Gerry Ritz has said the CWB needs to articulate a new plan in a post-monopoly environment.

In a speech in Winnipeg at the end of last month he implored the CWB to "roll up their sleeves and work with us not only in the best interests of the farmers who want choice, but in the best interests of those who continue to support the board."

But in his paper entitled Removal of the Canadian Wheat Board Monopoly: Future Changes for Farmers and the Grain Industry Boyd concludes that a successor entity to the CWB "may face challenges in the long term as a voluntary board, whatever organization form it would take."

In an interview he said the current lay of the land in the Prairie grain-handling industry is so competitive and capital-intensive that, regardless of what form a new entity takes, it would be an extremely risky and difficult proposition.

"I think there are clearly challenges," Boyd said in an interview. "If you I or the next person was put in charge of this voluntary board it certainly would not be easy. The private companies are fighting it out in the trenches now. It is a pretty rough, tough competitive business."

In the face of criticism about its apparent unwillingness to consider a Plan B, CWB officials point out that since it has no retained earnings, negligible assets and no grain-handling infrastructure, it needs to know what the feds have in mind before it can detail such a plan.

Even though the Frontier Centre is a supporter of the government's legislation to end of the single-desk monopoly, Boyd's essay gets a partial thumbs-up from the CWB.

"What he has done is identify many of the same challenges we have identified in our analysis of the feasibility and sustainability of a voluntary board in an open market," said CWB spokeswoman Maureen Fitzhenry. "There's been lots of talk of the fantasy of a strong and viable CWB in an open market. We have tried to explain that it's not easy or possible. This piece has made many of the same points."

Boyd outlines eight different scenarios each with significant challenges.

"That does not mean it is impossible," Boyd said. "But it is just really difficult."

Among the scenarios Boyd suggests a voluntary board may take (and the challenges it will face) are:

— it may try to function as a voluntary pool, but there has been very limited demand for pooling in non-CWB crops;

— the voluntary board may no longer enjoy the low-interest borrowing rate it now receives, and in fact, the private-sector companies would likely cry foul if it did;

— the voluntary board has no assets now and since there is currently ample capacity it would be difficult to embark on developing its own (and, in any case, the voluntary board might not have the resources to do it).

Boyd also suggests the voluntary board would be hampered in its efforts to compete because of a corporate culture that did not instil the institution with those abilities.

While he accepts that the single-desk structure has run its course, Boyd raises important questions about whether or not the CWB can survive otherwise.