November 30, 2006

The Canadian Wheat Board's Last Stand?

Farmers fear that proposed changes in the CWB will mean that farmers lose out and transnationals cash in

by Anna Kirkpatrick

The Dominion - http://www.dominionpaper.ca

On October 25, Inside US Trade, an American business magazine, published a report that could have serious implications for Canadian grain farmers. The Report of Technical Task Force on Implementing Marketing Choice for Wheat and Barley was first released not to farmers or the Canadian public, but to this US journal. According to Stewart Wells, President of the National Farmers Union (NFU), that reveals something about the report's underlying aims. "That should provide some indication of whose interests are being served with this report," he said. Essentially, the report argues for eliminating the present Canadian Wheat Board (CWB) and replacing it with the so-called CWB II, a move that many argue will threaten the viability of small wheat farmers in Canada and further increase the profitability of Big Agribusiness.

The Canadian Wheat Board was established on the initiative of farmers. At the beginning of the last century, farmers felt helpless at the hands of middlemen and market speculators, observing, among other things, an inordinate difference between the price they received and the eventual selling price. In response to this situation, the pre-cursor to the CWB was established in 1917. The Canadian Wheat Board Act was passed in 1935. The CWB has existed more or less in its present state for 70 years.

Today, the CWB is collectively owned by farmers and receives financial backing from the federal government (including low interest rates and guaranteed payments). The taskforce that wrote the report proposes to scrap the current board, which is composed of 15 members elected by farmers and five government representatives, and replace it with a board appointed entirely by the federal government. The move away from a farmer-controlled board is troubling for NFU's Wells. "Buried in the platitudes is the underlying theme of absolute government control of the Canadian Wheat Board," he said The report also suggests that the Board should be re-structured to a share-capital company, with shares available for sale to any interested buyer. The CWB argues that this move will shift control of the Board away from farmers and into the hands of shareholders. According to a statement issued by the CWB on November 6, "In the share-capital model, farmers are inevitably forced into the position of being a supplier instead of an owner."

Currently, the CWB has the exclusive right to market Western Canadian wheat and barley (with the minor exception of barley grown for feed). This function, referred to as a 'single-desk,' means that one organization represents all Western Canadian barley and wheat farmers. According to the NFU, "The CWB's single-desk selling advantage enables it to extract higher prices in world markets and to price-discriminate between buyers," thus getting more money for farmers. The NFU estimates that this advantage results in annual premiums of $265 million for wheat and $72 million for barley. The taskforce's report recommends that this feature be done away with, allowing other (mainly transnational) companies to compete. Agriculture Minister Chuck Strahl, who appointed the taskforce but did not sit on it himself, is in agreement with the recommendations and endorses "freedom of choice for marketing of wheat and barley and voluntary participation in the CWB." But various critics have pointed out that the CWB cannot be both strong and voluntary.

Jan Slomp farms near Rimbey in central Alberta; she is one prairie farmer concerned about what will happen if the single-desk is abolished. According to Slomp, in an environment of so-called 'market choice,' "the CWB cannot function. It does not have elevators or terminals, like all the other grain companies do. So in order to do business it would have to use facilities that were owned by other grain companies, making it impossible to capture a price higher than the price offered by these companies." As the CWB notes in its response to the taskforce report: "In the absence of the single-desk, a 'strong and profitable CWB' is a myth. In the absence of a single-desk there is no viable alternative for the Canadian grain industry other than that which exists in the rest of the world."

Globally, the grain industry is dominated by transnational corporations with four companies controlling more than 70 per cent of international grain market. In a report published last year, the NFU notes that while corporate profits are on the increase, farmers are earning less: "…overall, Canadian farmers have not earned a single dollar of profits from the markets since 1984. Over the same period, agribusiness has accumulated profits almost certainly reaching into the trillions."

When asked who stands to benefit from proposed changes to the CWB, Slomp is brief and to the point. She names the four biggest players in the global grain trade: Cargill, Bunge, ADM (Archer Daniels Midland) and Louis Dreyfus. In its statement, the CWB warns that removing its single-desk function would have a crippling effect on Canadian farmers, while boosting the power of transnationals. Control would fall to companies whose "focus is quite naturally on the most profitable way to make the sale…[and who] are necessarily indifferent to whether the grain needed for the sale comes from Argentina, America or Ukraine."

Those who support the re-structuring of the CWB argue that the board is obsolete and not financially viable. Various economists and think tanks (such as the George Morris Centre, the Frontier Centre for Public Policy and the National Citizens Coalition) have suggested that farmers would have lower costs and higher returns if the CWB were disbanded. The NFU disagrees. After tallying the benefits provided by the CWB (including price premiums, low freight costs and efforts to prevent the introduction of GM wheat) the NFU estimates that the Board saves farmers over $800 million every year.

Despite serious opposition from farmers, Minister Strahl is pushing ahead. According to Strahl, "We have promised to implement a system of marketing choice, and we are moving in that direction." Until recently, Strahl dismissed the notion of farmer plebiscites to determine the future of the CWB, even though such votes are required by law under the Canadian Wheat Board Act. But already, the resistance of farmers has met with some success. According to Stewart Wells, while there is still no commitment to hold a wheat plebiscite, "Farmers have scored a major victory by forcing the federal government to conduct a plebiscite on barley." Much will depend on how the plebiscite is worded, however. Wells, for one, is not optimistic: "We don't have much confidence this government will run a fair vote on this plebiscite."

For Jan Slomp a future without the CWB is a grim prospect. "Many farmers have indicated to quit producing after the single-desk is gone," she said. "It does not make sense to keep trying if all the farmer market power is gone."