Last chapter for Canadian Wheat Board
Dec. 20, 2011
by Morton Sosland
No experiment with governmental participation in the functioning of the wheat market has had a longer life than the Canadian Wheat Board. As the sole, legal purchaser of wheat produced in the three Canadian Prairie provinces since 1935, the Board will have had 77 years to prove to Canadian farmers and tax-paying Canadians whether such a system was positive for all those the system purportedly served. That a conservative majority government, elected in part on the plank of ending the CWB, is bringing this to a close next August goes a long way to explaining this event. Like the experiences of other countries where the voting public has sway, a shift to conservative, or less liberal, forms of government has been felt along the food chain. It is in Canada where the most dramatic shift is under way.
Established at the bottom of the Great Depression, a time when farmers around the world suffered from extremely depressed prices, the CWB’s origins were often traced to the European socialist backgrounds of many of the nations from which Canadian farm families had emigrated. Canada went considerably farther than the United States in establishing an agency like the Board with such complete controls over how wheat was going to be marketed. In the U.S., for example, farmers through the same period as the CWB existed could sell their wheat and other grains to whatever buyer they chose, with government supports for prices mainly by the crop loan program. Defaults under this program often resulted in the Commodity Credit Corp. (CCC) controlling a large quantity of U.S. wheat or other grains, but CCC acquisition and selling policies were designed to avoid conflicts with private merchants.
The CWB operated very differently. Each year it set an “initial” price for Canadian wheat, and this return was guaranteed by the government. Upward changes in initial prices were limited to increases in the event CWB selling prices on the world market produced a superior return. If not realized in prices, later payments were made from the profits, if any, achieved for a specific crop season. A desire to improve grower returns and thus to beat the system offering farmers only a market into which to sell meant that the Board found itself taking chances in foreign transactions. Negotiations sometimes resulted in fixing quantities and even prices over a period of years, giving the Board considerable power over global prices in those periods when the major buyers were often single countries like the Former Soviet Union and China. They had to deal with the Board as the single seller of Canadian wheat and barley.
Because of its importance in the prairies and across Canada, the Board’s leaders exerted much influence on the nation’s direction, economically and politically. Its chief executives were often leading figures in global negotiations not just having to do with grain but with relations in general. It’s hardly necessary to look beyond the large role the CWB had as a supplier of Canadian wheat to both the FSU and to China to recognize the Board’s hand in giving world grain trade such a prominent position in global trade and politics.
It is the disappearance of many leading single country buyers, the CWB’s reliance on prices set in open markets and the success of other systems, all reinforced by the global trend toward lesser governmental power that have combined to bring the Board to shutdown. Few doubt that prairie farmers will find much to enjoy in being able to sell to a range of buyers and dealing with a functioning, not static, wheat market. After so many years, the Board’s disappearance will create a vacuum. But the ability of grain markets to adjust efficiently to so much over the years provides confidence that writing finis to the Canadian Wheat Board just concludes another chapter in the amazing history of prospering global trade in grain.