Maintaining the Status Quo
November 01, 1996
by Teresa Acklin
Canadian government plans to uphold wheat board's monopoly.
The Canadian Wheat Board's monopoly over sales of wheat would be retained under grain marketing reforms to be proposed by the Liberal government of Prime Minister Jean Chretien, according to a policy statement issued in early October by the Ministry of Agriculture and Agri-Food.
While the C.W.B.'s wheat marketing monopoly will be upheld by the government, the future of the board's control over barley sales will be decided in a grain growers' referendum to be scheduled sometime this winter, the statement affirmed. Other reforms outlined in the statement were aimed at making the board more responsive to growers.
The ministry's policy statement came out strongly against the concept of "dual marketing" of wheat, which would allow individual growers to decide whether to market their wheat through the Canadian Wheat Board or sell their wheat on the open market.
Currently, the C.W.B. is the sole marketer of western Canadian wheat that is destined for export markets or for domestic human consumption, but a panel convened to study ways to modernize the C.W.B. earlier this year recommended that farmers be offered the option of selling a portion of their wheat outside of the Canadian Wheat Board (see September 1996 World Grain, page 26). A number of wheat growers in the Prairie provinces also have pushed for an end to the C.W.B. monopoly.
While some farmers demand "freedom" to market their wheat and barley independently in order to capture the full benefit of U.S. spot prices, the vast majority of farmers continue to support the C.W.B., the statement said. Many opponents of the board's monopoly claim they do not seek the demise of the board, the statement acknowledged. Instead, they seek a dual marketing system in which the board would compete for farmers' grain with the private grain trade.
But the Canadian government statement was firm in its assertion that a dual market is unworkable.
"It is simply not accurate to suggest that two quite opposite marketing systems (price pooling versus open marketing) can coexist simultaneously without the one undermining the other," the ministry said. "It is not accurate to assume that the Canadian Wheat Board could just carry on unaffected, for those who want to use it voluntarily from time to time. The board would be profoundly affected. It would be diminished."
The ministry's statement maintained that a voluntary C.W.B. would be required to operate in competition with private grain companies — but without grain collection facilities such as country elevators or export terminals.
"The board would be in the position of just another grain company, but without any rural infrastructure," the ministry statement said. "Its pooled price would be lower overall, to the extent that the highest U.S. prices were collected on an individual basis outside the pooling system. The price pool would be smaller and diluted."
Another problem with a dual marketing system would be price relationships, the statement said.
"At times when U.S. spot prices were moving up, the C.W.B.'s pooled price would appear relatively unattractive," the ministry continued. "The board would not be able to draw in deliveries, and it could not offer its global customers any assurances about security of supply. Canada's reputation as a reliable world supplier would thus be jeopardized."
Conversely, when U.S. spot prices were falling, the C.W.B. could be un- expectedly inundated with grain, the statement said, and such sudden surges could harm the viability of initial payment guarantees.
"With multiple sellers marketing grain, Canada's renowned ability to guarantee quality and consistency would be put at risk," the ministry charged.
Voting on Barley
The Chretien government's position on barley marketing differs from wheat; the future of barley marketing will be decided by growers in a referendum to be held in the winter, the statement said.
"They will be asked a clear-cut question about whether they wish to put all barley (both feed and malting) onto the completely open market for all sales, or would they prefer to retain the current system through which the C.W.B. remains the single-desk seller for all barley exports and domestic barley sales for human consumption," the statement said.
The governance of the C.W.B. would be placed in the hands of a board of directors, a majority of whose members would be farmers, under the government's proposals.
"To facilitate a prompt and smooth transition to the new structure, a full set of interim directors will be appointed by the government of Canada in 1997. ... The producer-director majority will be replaced by directors elected by the farmers, beginning in 1998."
The C.W.B. Advisory Committee, which currently provides grower advice to the C.W.B.'s board of commissioners, would continue to exist until the election of producer-directors is under way, the statement said. The government would continue to guarantee the board's annual Aug. 1 initial payments to growers, its credit sales program and its annual operational borrowings.
Other proposals, to be included in legislation the government soon will introduce, relate to day-to-day operations of the C.W.B. and how they could be improved for the benefit of the growers, the statement said.
The government plans to draft a proposal that would allow the C.W.B. to make cash purchases of wheat and barley, the ministry said. Another proposal would enable the C.W.B. to close pool accounts at any time to provide final payments to farmers as rapidly as possible.
These and other proposed changes would all be effected without abridging the C.W.B.'s wheat marketing monopoly.