The end of single-desk selling?

by Teresa Acklin
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Canadian grain panel suggests major changes in country's wheat marketing, but C.W.B.

advises caution

   The Canadian Wheat Board should retain responsibility for export and domestic marketing of licensed classes of Canadian wheat, but farmers should have the option of selling a portion of their western red spring wheat to the C.W.B. on a spot or forward basis, according to a panel exploring ways to modernize the C.W.B. and to provide greater flexibility in its operations.

   The panel also recommended that organic and unlicensed wheats should be handled on the open market through an identity-preserved system supervised by the Canadian Grain Commission, outside C.W.B. jurisdiction. It also said that farmers should be allowed to sell feed barley, both domestically and for export, on the open market.

   Under the option enabling farmers to sell up to 25% of their red spring wheat outside the pool, the panel recommended that the C.W.B. offer spot or future-delivery cash prices based on the appropriate futures contract. A similar cash option for other wheat classes, except durum, also should be implemented if feasible, the panel said.

   Other recommendations included restructuring the Board to improve accountability to farmers. The current three- to five-member appointed wheat board should be replaced with a board of directors "of not less than 11 and not more than 15 elected and appointed members," the report said, composed of a majority of farmers, a minimum of three representatives from the trade and a minimum of two representatives from the federal government.

   The recommendations were contained in a long-awaited report released in early July by the Western Grain Marketing Panel, a group appointed by the government in July 1995 to study the Canadian system. The C.W.B. is the sole entity allowed to sell Canadian wheat and barley for export or for domestic human consumption, but some grain producers have been pressing for a dual-marketing system that would allow the sale of wheat and barley on the open market (see January/ February 1996 World Grain, page 54) The panel's report followed 11 months of consultations and public hearings with farmers, processors, food companies and others.

   In releasing the report, Ralph Goodale, Minister of Agriculture and Agri-Food Canada with responsibility for the C.W.B., pointed out that the nine-member panel was unanimous in its recommendations.

   Mr. Goodale asked for public comment on the panel's recommendations by the end of August. He said the panel had produced "constructive and unanimous suggestions for possible solutions to seemingly intractable grain marketing issues."

   C.W.B. reaction was more muted. While agreeing with many of the report's recommendations, Lorne Hehn, C.W.B. chief commissioner, warned that one could threaten Canada's grain marketing system and reputation for quality. He cited "serious concerns" with allowing unlicensed wheat varieties to be sold outside C.W.B. jurisdiction.

   "Any changes that are made to Canada's world-renowned quality control system should be made with a view to enhancing the present system, not jeopardizing it," Mr. Hehn said. "This proposal, if implemented, would completely undermine both our quality system and our marketing system."

    Mr. Hehn also expressed concern that moving feed barley to an open market inevitably would lead to an open market for malting barley as well. The current system offers a substantial premium for malting barley, which could be eroded in an open market environment, he said.

   In the introductory chapter of the report, the panel noted that Canadian grain marketing policy had come under pressure from events in both the international and domestic environment during the past 10 years. Export subsidies on the part of the European Union and the United States, the Uruguay Round of negotiations under the General Agreement on Tariffs and Trade, the Canada-U.S. Trade Agreement and the North American Free Trade Agreement all were major influences, the report said.

   Meanwhile, on the Canadian domestic scene, intense debate has developed over western Canada's grain marketing system, the report noted. During public hearings, the major issue centered on whether wheat and barley should continue to be marketed through a single-desk system or whether grain producers should be allowed to sell on the open market.

   "On this central issue, the panel confirmed a deep and fundamental division among farmers," the report said. "While there are still many farmers who strongly support the marketing of wheat and barley through the Canadian Wheat Board, there is a growing number of farmers who are asking for more options and flexibility in the marketing of all grains."

   The panel noted that regardless of their position on the future role of the C.W.B. in the marketing of western grains, there was considerable agreement on changes that should be made to improve the operations and governance of the C.W.B. The most common concerns expressed about the C.W.B. by farmers were a lack of accountability to farmers for its performance and inflexibility in its operating policies.

   The grain handling and transportation system also came under criticism. Future ownership of the government fleet of hopper cars was an issue, and there was concern regarding insufficient competition in rail services to ensure competitive rates and services.

   Major grain processors generally were satisfied with the manner in which they were currently able to purchase their grain supplies for processing. But some concerns were expressed by the baking industry and pasta manufacturers, and among smaller value-added processors, there was considerable concern expressed about the system under which they procure supplies and an interest in seeing a less regulatory environment for their operations.