Attacking the Canadian Wheat Board

This article from The Tyee reviews the history of the CWB and recent attacks by the Harper government:

Harper’s Hit on Grain Farmers: Tories will aid US firms by gutting Canadian Wheat Board

By Albert Horner and David Orchard

TheTyee.ca

For a year the Harper government has been threatening to destroy the power of the Canadian Wheat Board (CWB). Agriculture minister Chuck Strahl (who represents Chilliwack, B.C.) says barley will be removed from the Board’s jurisdiction by August 1; a decision on wheat will follow.

In the early 1930s, there was no CWB. Prairie farmers took the price offered by the large grain companies or took their wheat home. Grain sold for a few cents a bushel. Farmers were driven off the land in droves.

In response to pressure and thousands of farmers demanding an end to the unfettered power of the grain giants, R.B. Bennett made a historic radio address referring to “unconscionable monopolistic purchasers” and “economic parasites.” He set up the CWB as a single seller of prairie wheat. In the 1940s Mackenzie King extended the Board’s power to include oats and barley.

Starting from nothing in 1935, the Board has grown into the world’s largest marketer of wheat and barley, one of Canada’s biggest earners of foreign currency and perhaps the most prestigious marketing board in the world.

A recent PricewaterhouseCoopers study described as “huge” the $1.6 billion annual economic impact of the Winnipeg-based Board, “with Western Canada as a major economic beneficiary.”

As OPEC gave undeniable clout to oil producing countries, so the CWB’s quasi-monopoly put marketing power in the hands of farmers.

‘Communist’ upstart?

Since its founding, the U.S. grain companies dominating the world grain trade have fought this impressive upstart. Earlier, they called it “communist.” In the last 15 years, the U.S. has mounted a dozen trade challenges seeking its demise.

The reason is simple. The Wheat Board returns all revenue earned to the farmer, minus a miniscule per bushel administrative charge.

Loss of the CWB would move the Canadian grain trade into U.S. hands virtually over night. Hundreds of millions more in profits annually would drain from the farmer to the “five sisters” that dominate the international grain trade, none Canadian. The Port of Churchill — with the bulk of its business from the CWB — and the entire east-west rail system including the great grain terminals in ports from Québec City to Prince Rupert would be at risk.

If the Canadian Wheat Board goes, who believes the rest of Canada’s supply-managed agriculture is safe?

Since assuming power the Harper government has waged an unrelenting attack on the CWB — firing its popular CEO, Adrian Measner, stacking the board with government appointees who detest it, and holding a fraudulent barley “plebiscite” (complete with gag orders, a secret voters’ list, traceable ballots and deliberately misleading questions). Still, only 13.8 per cent voted to remove barley from the Board.

This unprecedented assault on the internationally respected CWB by its own government has not gone unnoticed. Standard and Poor’s recently downgraded the Board’s formerly pristine credit rating, and according to the largest buyer of Canada’s wheat, China’s Yang Hong,” Once the CWB’s single-desk system is abolished, we think the Canadian wheat industry may lose advantages to other competitors.” He said his company may turn to other countries if Canada can no longer guarantee reliable supply and quality. Mexico’s Grupo Altex president wrote, “We would hate to see you adopting the U.S. model, where we have to deal with the large trading houses that always try to take advantage of both farmers and clients like us and very seldom, if ever, deliver what they promise.”

Harper majority will seal fate

But the Wheat Board is not gone yet. For over 70 years it has — with Ottawa’s backing — withstood American hostility. Now the Harper government is about to do what the U.S. alone has been unable to accomplish; it plans, by order-in council, to strip the Board of its marketing power on barley.

Once before, a Canadian government joined the Americans against its own farmers. Following its signature on the Canada-U.S. Free Trade Agreement in 1989, the Mulroney government took oats from the Board. In 1993, it tried the same with barley, but was stopped by a successful court challenge. The government changed and Ralph Goodale and Jean Chrétien held a fair vote among farmers, restored barley to the Board, where it has remained ever since, and introduced the Canadian Wheat Board Act putting farmer elected directors in control.

This time, too, a court challenge may follow. However, as in 1993, only a change of government will secure the Board’s future. A Harper majority will see the CWB gone, and quickly. The new Liberal leader, Stéphane Dion, behaving more like a friend of the western farmer than the Alberta based Harper administration, has promised to restore the Board’s powers putting full control of its future back into farmers’ hands. Whatever changes the CWB needs — and every farmer knows of some — will be made by farmers, not imposed from Ottawa or Washington.

Today, the Liberal party is truer to John Diefenbaker’s defence of the West than the party claiming his name.

Albert Horner is a retired grain producer and livestock breeder. A four-term Progressive Conservative MP under John Diefenbaker, he lives in Blaine Lake, S.K. David Orchard was a candidate for the Progressive Conservative party leadership in 1998 and 2003. Author of The Fight for Canada: Four Centuries of Resistance to American Expansionism, he farms at Borden, S.K.

10 comments

  • janfromthebruce

    Marc, David Orchard forgot to mention that he is shilling for the liberal party, as a liberal member and running to be a candidate in the upcoming ‘sometime’ fed election. Too bad it ended with a paid ad for the libs.

  • Do the CWB’s efforts increase food prices?

    If so, then why should a progressive support it?

    If not, then just what is it that the CWB does?

  • janfromthebruce

    Because it is about not only food price but also farmers getting a fair price for the food they jproduce. Personally, when a carbon grade is applied to products on store shelves, community-supported agricultural will be the choice of consumers, as the ‘further’ food has to travel from the field to the meal table increases co2 emissions. All those nasty emissions happening through transportation of the products.
    So when did you think its a good plan for farmers to subsidize the food we eat?

  • Jan, many economists are risk averse to the use of the word “fair”. Stephen, just treat it like mark up pricing where marginal revenue = marginal cost over the long term. You will sleep better if it you think of it that way.

  • Stephen, we have to be careful to think about the chain by which food gets from the farmer’s field to the store in which it is purchased. In a stylized version, it would be something like: farmer sells to middleman, middleman sells to supermarket, supermarket sells to consumer.

    The CWB acts as the middleman, and does increase prices to farmers, but this only affects consumers if that price increase is passed along at every stage. But as a middleman that is not dedicated to maximizing its own profits per se, and as a price taker in the international grain markets, the CWB simply captures the market segment that would otherwise go to private sector middlemen.

    The concern with elimination of the wheat board, which allows smaller farms to be viable (to the extent we value that), is that it will reduce the price received by (already marginal) farmers. But the new middlemen, an oligopoly of large US agribusiness, will likely just pocket the difference between purchase price from the farmer and the international grain price — and consumers will not see any reduction in price at the end of the day.

    So if there is a pie to be divided, should we make a policy decision to give a bigger slice to farmers? I would say yes.

  • I don’t see how market power in agribusiness could be sustained in the absence of some other sort of govt-mandated licence.

    But let’s suppose that this is the case. If the ‘middleman’ has this sort of market power, then how would CWB-induced higher prices eat into that? If the CWB demands higher prices, and if the middlemen have no competition, everything would be passed them on to the consumer.

  • I’m confused by your comment, Stephen.

    I see it like this: if the world market price of wheat is p, and farmers produce n bushels, the potential income is np. First, assume a scenario with the CWB: after taking a cut to cover administrative costs, a, the income to farmers is np – a. In a second scenario, there is no CWB, and an oligopoly of middlemen come in, and make profits, k, so the income to farmers falls from (np – a) to (np – k), with a less than k.

    Farmers are the weakest link in the chain from field to table, and without a body like the CWB to give them some market power, they are price takers. The CCPA has released a few publications on this topic. Below are links to a short piece done just last year looking at the CWB (from our Saskatchewan office), and the second is a bit more dated (2001) but does a good job describing the links in the chain:
    http://policyalternatives.ca/documents/National_Office_Pubs/farm_crisis.pdf
    http://policyalternatives.ca/documents/Manitoba_Pubs/2006/FastFacts_September1_06_WheatBoard.pdf

  • I don’t doubt that the CWB can make farmers better off. My concern is for the people who lose out from this arrangement, namely consumers. And since low-income households spend a larger share of their income on food, they are hit hardest.

    The best way to help farmers is to just provide direct income support.

  • Stephen…How much hard grain do you eat to think the common price offered by the CWB is unreasonable… To anyone. Bread is the most readily available item to Canadians, low income, from food banks.
    We don’t have teh huge subsidies that US and Eurpoean farmers receive. Instead we have the CWB, where farmers get their worth. Many people are truly seeking to destabilise the large collectives around teh prairies who aren’t consumer addicts, unless you call buying more land and making bigger colonies consuming, and make agreements to make their grain a no-sell thing.
    The wheat board has instituted international consumer confidence in our product which will be lost as outlined earlier in the article.
    To the math; now that the primary energy sector has driven our dollar to 30 year highs will there be respite for our farmers who will face increased shipping costs resulting in lower net worth of their product, deflated offered price ( to ofset teh consumer demand for cheap foodstuffs vs increased transport) and lost confidence from lower grade grain being hidden among carloads of high grade (the US model) Evidence chinese contaminated pet food. This is the no desk market.

    All these things said, now where does that leave our farmer??
    Begging for bread at the food bank.. The irony of the Harper future is amazing. From bread basket to bread line (likely a very slow one).

  • Pingback: Battle heats up over barley monopoly « The Agonist

Leave a Reply

Your email address will not be published.