C.W.B. reform expands farmer control, leaves monopoly intact
October 01, 1998
by Teresa Acklin
Recently enacted amendments to the Canadian Wheat Board Act of 1935 provide for reform of the governance and certain operations of the Canadian Wheat Board while leaving intact the board's monopoly over the marketing of western Canadian wheat and barley for export and domestic human consumption.
The key provision of the amendments, enacted by Parliament on June 11, replaces the C.W.B.'s existing commissioner-based governing structure with one based on a president and a board of directors.
Currently, three commissioners appointed by the federal government are responsible for overseeing the day-to-day operations of the C.W.B. The commissioners will continue in their roles until the board of directors is installed, which will take place before the end of the year.
The board of directors will comprise 15 members: five will be appointed by the federal government and the other 10 will be directly elected by western Canadian grain farmers. In its deliberations, the Senate, the upper house of Parliament, recommended that five of the elected members be from Saskatchewan, the largest wheat-producing province; three from Alberta; and two from Manitoba. This recommendation was expected to be included in the new law's implementing regulations now being drafted by Ralph Goodale, the minister responsible for the Canadian Wheat Board.
The first election of board members was expected to be scheduled for October or November. Ideas were that voting would be conducted on the basis of one vote per farming unit, but this, too, will be determined in the rule-making process now under way.
The members of the board will elect one of their number as chairman of the C.W.B. They also will have the authority to control salaries of directors, chairman and president and shall have full access to all facts and figures about C.W.B. operations, including, but not limited to, audited financial statements. And they will be able to examine prices at which grain is sold, the price premiums achieved and all operating costs.
The president will be the C.W.B.'s chief executive officer and will be responsible for all of the marketing board's day-to-day activities. He or she will be headquartered at the Winnipeg offices of the C.W.B., whereas the board of directors will meet according to timetables yet to be determined.
The president will be appointed by the federal government after consultation with the board of directors. It was hoped that a president would be selected within the next 15 months, according to Minister Goodale. If the search for a chief executive becomes a lengthy one, an interim-president could be appointed.
The board will have the right to review the performance of the president and, if it deems necessary, recommend his or her dismissal. But the actual dismissal of the president will be the prerogative of the federal government, specifically of the minister responsible for the C.W.B.
“Through its elected directors, the C.W.B. will gain the practical expertise of real producers,” said Minister Goodale. “If the directors are not satisfied with how the C.W.B. deals with farmers or with any other aspect of its business, they can make the necessary changes. And if farmers are not satisfied with their directors, they can change them in subsequent elections that's democracy and accountability in action.” The existing Advisory Committee to the C.W.B., which comprises 11 farmer-members elected by grain growers, will be terminated, but not before its mandate expires at the end of 1998.
GROWER CONTROL QUESTIONED.
Critics of the legislation, both those in favor of the grain marketing monopoly of the wheat board and those opposed to it, have questioned just how democratic the new governing structure will be.
Larry Maguire, president of the Western Canadian Wheat Growers Association, a group of mostly large farmers seeking an end to the C.W.B.'s wheat and barley marketing monopoly, said the federal government's influence over the board would remain pervasive. Even the farmer-elected directors would be required to act in the best interests of the corporation, not the people who elected them, he said. And the board will have to submit an annual plan to the government for its approval.
“A proposal to create a provincial legislature along these lines would be a laughingstock of the nation,” Mr. Maguire said. “But when such a plan is imposed on western farmers, we are supposed to welcome it as democratizing the C.W.B.”
The Advisory Committee, while at loggerheads with the W.C.W.G.A. over the question of the virtues of the single-desk selling system, also has been less than enthusiastic about the new governing structure of the C.W.B. The committee has requested clarification from the federal government concerning whether the elected directors will be ultimately responsible to the government and the C.W.B. or to the growers who elected them.
The new law upholds the single-desk selling system for western Canadian wheat and barley and the principle that no future changes to the C.W.B.'s marketing jurisdiction either to add or to remove crops from the board's mandate can be made without a vote among farmers.
“The critical factor for the future will be the full democratic participation of farmers,” Minister Goodale said. “They will have the means to shape their marketing agency as they see fit, and I hope producers will use that new empowerment to the maximum.” But the W.C.W.G.A. is skeptical about how such a vote among growers would be conducted, even if the board of directors, as constituted, were ever to decide to call one.
Mr. Maguire said his group also was concerned that voting procedures, both for the directors and in any mandate-defining plebiscite, would not take into consideration the individual farmer's stake in the industry. A simple one vote per farm or one vote per C.W.B. permit-book holder would tend to give undue power to those who produce too little grain, and too little voice to those who produce most of the wheat and barley in western Canada, he said.
OPERATIONAL FLEXIBILITY PROVIDED.
The amendments also provide the C.W.B. the authority to purchase grain and to pay farmers in new ways. Currently, on each Aug. 1, the beginning of a marketing year, the C.W.B. announces initial payments that producers will receive for their wheat or barley. These initial payments are guaranteed by the federal government. Subsequent adjustments to the initial payments sometimes are made, and these also are guaranteed by the government.
The board then pools returns from sales abroad and from sales to domestic grain processing facilities in the course of the year. After the initial payments and any adjustments are covered and expenses are paid, any funds remaining in the pools (wheat and barley) are distributed to the producers.
Under the new law, the C.W.B. also may make cash purchases of wheat and barley from producers or grain merchants at a price other than the initial payment. This provision could, in certain circumstances, result in more expedient procurement of grain and a more effective sales programs, the government said.
Additionally, grain may be purchased at locations other than an elevator and in conveyances other than rail cars. This will enable the board to purchase grain on the farm and transport it via truck.
Provisions allow the board to make storage and other delivery-related payments to farmers. Being able to pay farmers carrying costs reduces the C.W.B.'s obligation to draw grain evenly from all areas of the Prairies throughout the crop year while maintaining equity among producers, according to the government. This is because it provides a mechanism to compensate those who store grain for longer periods of time.
The government said this would enable the C.W.B. to engage in more effective logistical plans and operations. In addition, it would allow the C.W.B. to pay bonuses to farmers who demonstrate superior performance in fulfilling delivery contracts with the C.W.B.
Under the new law, grain deliveries may be permitted to producer-owned or leased condominium storage facilities without regard to delivery quotas or contracts. The amendments further provide the C.W.B. the option to terminate pool accounts at any time and to disburse surplus funds at any time following the closure of the pool. The C.W.B. also may issue negotiable producer certificates or provide a pool cash-out option to producers. And the C.W.B. will be able make use of risk management tools.
The law also calls for the establishment of a contingency fund. Unlike the current system, where the government guarantees the wheat board's initial prices no matter what adjustments to the payment are made during the year, under the new law, the government ultimately will back only the payment set at the beginning of a new crop year.
Subsequent adjustments to the initial payments will be backed by the contingency fund. The fund also will be used to facilitate cash trading, make early pool cash-outs and expedite payments.
These provisions have raised concern among some proponents who see in the new law a possible withdrawal of the federal government's commitment to western Canadian grain growers.
“Bill C-4 is permissive legislation that gives the new board of directors many options that could undermine the strengths of the C.W.B.,” said Art Macklin, chairman of the Advisory Committee. “Any changes to the C.W.B. must ensure that it continue to equitably serve producers through price pooling, maintain the single-desk selling system and preserve federal government-farmer partnership.”
Mr. Macklin said permitting unrestricted cash buying of grain at a price other than the initial payment could eventually undermine price pooling and single-desk selling.
“Farmers must also ensure the government is not able to off-load more of their responsibilities on farmers,” said Wilfred Harder, Advisory Committee vice-chairman. Mr. Harder noted that the contingency fund, in time, could replace the federal government's guarantee on adjustment payments and borrowing.
“This is the first step toward complete withdrawal of government guarantees,” Mr. Harder said. “The guarantees cost the government virtually nothing, but it will cost farmers millions of dollars. We must ensure the government withdrawals stop here.”