Canadian wheat export monopoly staggers

The wheat board, founded 75 years ago as part of a wave of cooperative
ventures for improving farmers’ lives, is now one of the world’s largest grain
traders, with annual sales of CAN$4 to $6 billion (US$3.4 – $5.15
billion).

The board is among the last of the cooperative projects that
remains true to its original goals. But those goals now have little in common
with the open market philosophy of the minority Conservative government that
came to power just under a year ago. Shortly before Christmas, that clash
resulted in an unusual cabinet order to fire the wheat board’s president, Adrian Measner.

The fate of the board will be
eagerly awaited in the United States, where farm groups have unsuccessfully
challenged the Canadian board’s monopoly. Among the companies likely to move
into Canada’s export market, if it is opened, are commercial grain traders like
Cargill and Archer Daniels Midland.

Simple concept
The wheat
board concept is simple. In exchange for its monopoly over wheat destined for
export from Canada’s three prairie provinces, as well as a small part of British
Columbia, it pays every farmer the same average sale price. Overall price
averaging has provided most farmers with greater stability and higher prices
than they would have obtained in an open market.

A study commissioned by
the wheat board on barley prices released in December gives more specifics. The
report, by Richard S. Gray of the University of Saskatchewan, Andrew Schmitz of
the University of Florida and Troy G. Schmitz at Arizona State University,
concluded that farmers’ barley
revenue from the wheat board was 59 million Canadian dollars higher
from 1995 to 2004 than it would have been in an open market system.

Wheat
board supporters argue that the board also helps farmers by negotiating terms
with railways and ports.

The system seems to have supporters on the
buyers’ side as well. It provides a more uniform grading of grains than is
available in the United States, for instance.

But averaging prices has a
significant drawback for some farmers. By definition, an average price is often
lower than what individual farmers who live near the United States border could
obtain by directly trucking their harvest south.

Chuck
Strahl, the minister of agriculture, has repeatedly said that all
he wants is to give farmers the choice of pooling their risk through the wheat
board or going out on their own. “We are trying to get more marketing choice for
farmers,” he told the House of Commons in December. “We want to put more money
in their pockets. We want them to take advantage of their own
expertise.”

Strahl has not found it easy to end the board’s monopoly. A
1998 law gave farmers control of the board by letting them directly elect 10 of
its 15 directors, with the balance, including the president, being appointed by
the government.

Now Strahl plans a vote on creating an open barley market
early in 2007. But he has also made it clear that the government will not be
bound by its results.

Ken Ritter, a farmer from Saskatchewan who is the
board’s chairman, said the legal challenge of the government’s orders will
continue as will the board’s campaign to keep the current system. “This is very,
very divisive,” Ritter said. “This has gone on for 40 years.”