December 27, 1995 in Nation/World

Canadian Farmers Revolt Grain Growers Want To Scrap Nation’s Monopolistic Marketing System

Aviva Freudmann Journal Of Commerce
 

A prairie fire of revolt is spreading across Canada’s grain-producing western provinces, sparked by farmers who feel cheated by the government monopoly over grain marketing.

Each year since the depths of the Great Depression, Canadian wheat and barley farmers have dutifully emptied their granaries to the Canadian Wheat Board, a government agency that has sole rights to market the grain abroad and to sell it to millers inside Canada.

In return for the rights to market their grain, the wheat board offered farmers a measure of security - a guarantee they would not be caught short by sudden price drops. Farmers receive a uniform initial payment when they deliver their grain to the board, and later receive a final payment based on the pooled returns the board has obtained in all foreign markets.

This year, however, that system began to break down. As strong demand and poor crops drove up prices on the U.S. spot market, many Canadian farmers - particularly those living near the U.S. border - decided their country’s Depressionera marketing regime will simply not do. Risking hefty fines, they drove truckloads of wheat and barley south to U.S. buyers, who were offering 74 U.S. cents to $1.11 more per bushel than the wheat board.

Then, earlier this month, federal agriculture officials received another jolt. A plebiscite organized by the government of Alberta, one of the primary grain-producing provinces, showed that fully two-thirds of wheat and barley farmers would prefer a dual marketing system to the current monopolistic one. Under a dual system they would be free to sell their grain directly to foreign buyers, to multinational grain companies or to the Canadian Wheat Board, as they see fit.

Together with a pending court case filed by a farmer challenging the government monopoly, the Alberta referendum has sharpened the focus of a debate that has been carried on in coffee shops and grain elevators for decades: Whether the time has come to scrap Canada’s grain-marketing monopoly and replace it with a more open system.

“What we are seeking is a choice,” said Larry Maguire, president of the Western Canadian Wheat Growers Association and leader of the campaign for a dual marketing system. “That’s not to say the Wheat Board should disappear.”

But the notion of free choice, combined with a government marketing agency, is fraught with problems, defenders of the wheat board say.

“It’s called having your cake and eating it, too,” said Gordon Pugh, manager of national affairs for Prairie Pools, the Ottawa-based policy arm of grain producers in Alberta, Manitoba and Saskatchewan.

A dual marketing system would deprive the government of assured supplies of high-quality grain, he explained. That would compromise the federal government’s ability to sell forward into export markets.

Moreover, if the federal wheat board were to acquire competitors in the business of marketing Canadian grain, it could no longer pricediscriminate among different export markets, or dictate prices for Canadian grain to foreign buyers, he said.

Neither argument impresses proponents of a free market, who argue farmers should be free to seek the best deal they can find, rather than subsidizing other farmers through a forced price-pooling system.

“The wheat board is saying it can’t exist in a dual marketing system,” Maguire said. “That sounds like sour grapes. Look at any other crop: Corn goes back and forth across the border. People will grow whatever the market needs.”

The government’s general policy to deregulate, privatize and cut expenditures wherever possible is one of the forces driving this debate, according to wheat board spokesman Bob Roehle. “There is more sentiment for the free market than there used to be,” he said.

A recent study by University of Manitoba economist Al Lyons found the wheat board has been costly to Canadian taxpayers. Lyons discovered that since 1984, the government has paid more than $740 million to farmers to make good on promises to guarantee prices when export markets have fallen.

The argument over the wheat board also has grown more shrill in the wake of last summer’s elimination of a grain rail transportation subsidy known as the Crow rate.

The end of the subsidy meant farmers received lower prices for their grain at the farm gate, “and now the U.S. price is that much more attractive,” Roehle said.

However, he added, proponents of an end to the single-desk system should be careful what they ask for; they may not like the results.

U.S. wheat farmers, for example, have long complained that the Canadian Wheat Board unfairly undercuts their prices in third-country markets. But if the wheat board were to disappear, “probably what would happen is there would be a hue and cry from U.S. farmers (about increased Canadian grain imports), and they would try to close the border,” he said.

Indeed, there is some evidence that is exactly what U.S. grain farmers would push the Clinton administration to do. A surge in Canadian grain imports two years ago prompted loud complaints from American farmers and led to a U.S.-imposed cap on Canadian imports.

That restriction was lifted last September. But the Clinton administration warned at the time that a new surge of imports could lead to new import quotas.

“U.S. producers should be happy that the wheat board is selling in their market,” said Pugh of Prairie Pools. “The wheat board tends to sell to end-users, rather than delivering through facilities adjacent to the border, which plug up U.S. producers’ delivery opportunities. U.S. farmers should prefer that system to having an uncontrolled movement of Canadian grain to wherever a farmer wants to sell. In our view, that would be somewhat more disruptive than the controlled flow we now have.”

Ultimately, the issue of Canada’s grain marketing system might be resolved in international trade negotiations.

“I presume the next battle will be in the World Trade Organization,” the wheat board’s Roehle said.

Graphic: Wheat exporters


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