BUSINESS

STORMING THE BORDER

A growing number of western farmers oppose the wheat board’s monopoly on grain exports

MARY NEMETH December 18 1995
BUSINESS

STORMING THE BORDER

A growing number of western farmers oppose the wheat board’s monopoly on grain exports

MARY NEMETH December 18 1995

STORMING THE BORDER

A growing number of western farmers oppose the wheat board’s monopoly on grain exports

BUSINESS

The outcome was not entirely a surprise—and yet it rocked Canada’s agricultural sector last week. Asked whether they favor having “the freedom” to sell barley or wheat to any buyer, more than 60 per cent of the Alberta farmers who took part in a provincewide plebiscite answered yes. In so doing, they signalled their desire to abolish the monopoly on grain marketing enjoyed by the 60-year-old Canadian Wheat Board (CWB), a Crown agency that sells wheat and barley worldwide. Wheat board supporters—who contend that ending the monopoly would lead to the death of the wheat board—were critical both of the process and of the question, especially its use of the word “freedom.” And federal Agriculture Minister Ralph Goodale, who has established his own panel to review grain marketing, said the outcome merely gave “a snapshot of some producer opinion in only one province on a wide-ranging issue that affects all Western Canada.” In fact, only 16,000 of the 40,000 eligible voters actually cast ballots in the plebiscite. Even so, Alberta Agriculture Minister Walter Paszkowski insisted that farmers had sent a powerful message. “The laws have to reflect what the people need and want,” Paszkowski added. “Mr. Goodale is going to have to recognize that.”

Since the 1940s, federal legislation has compelled Prairie farmers to sell all wheat and barley intended for human consumption or export through the board, which markets the grains worldwide, pools the returns and shares the money among producers. But lately it has come under fire, and not just because of the Alberta plebiscite. Last week, a Winnipeg court heard final arguments in the trial of Manitoba farmer David Sawatzky, who was challenging the board’s monopoly. A verdict is expected by the end of the year. Other farmers, meanwhile, have joined two barley-growing organizations to launch a constitutional challenge to the Canadian Wheat Board Act.

Groups such as the Western Canadian Wheat Growers Association are also lobbying for change.

“Farmers have the freedom to sell all of their other grain products,” notes Wheat Growers president Larry Maguire. “We want farmers to have the choice of how to sell wheat and barley, too.”

The Alberta plebiscite, though, did not appear to sway the NDP government in neighboring Saskatchewan. Agriculture Minister Eric Upshall issued a statement saying that the Alberta vote was flawed. He noted that Saskat-

chewan farmers produce more than half the grain marketed by the wheat board and insisted that they “remain strong supporters of the CWB.” The board, meanwhile, responded to the plebiscite with its own survey. It found that while most Alberta farmers say they want the freedom to market their wheat to any buyer, only 29 per cent of respondents would favor that approach if they knew that it would lead

to the elimination of the board. “With a different question,” says Wilfred Harder, a Manitoba farmer and the chairman of the CWB’s farmer advisory committee, “it’s an entirely different answer.”

The battle over the wheat board 2 is being played out against a § backdrop of sweeping change in I Canadian agriculture. The Crow I Rate—the once sacred rail sub1 sidy on the transportation of grain S to ports in British Columbia and Ontario—disappeared earlier this year, a casualty of the federal gov— ernment’s budgetary squeeze and international trade agreements. Without that incentive to export, experts say, increasing numbers of processing plants and livestock operations are likely to spring up on the Prairies. In the meantime, many farmers have diversified into canola and specialty crops that do not come under the wheat board’s jurisdiction. And new technology—from computer modems to fax machines—has

made it easier for them to keep tabs on world prices. Industry watchers say that farmers are taking a bigger interest in the marketing of their products. Some are even trading canola futures or feedbarley options to cushion themselves against price fluctuations.

Alberta’s Paszkowski argues that eliminating the wheat board’s monopoly would encourage ever-greater marketing expertise. “Ultimately, we think producers would become far more knowledgeable in marketing, far more entrepreneurial,” Paszkowski said. “And at the end of the day, we feel that the average producer will be in a position to get more for his grain.”

In reality, any comparison of prices is contentious: there are many grades of wheat and barley, and the board regularly updates its estimated final price. (It pays farmers only a base initial price— making up the difference after pooling its returns.) Critics claim that at one point this fall, spot prices at U.S. elevators were as much as $110 higher per ton of durum wheat than the board’s projected price, in part because of differences in grading. Board officials respond that the difference was no more than $18, and is even lower now.

Wheat board officials concede that American spot prices can be above or below their projected price at any given time, because the projection is based on a full year of sales. But even if the United States consistently offered the best price, Canada only sells about

eight per cent of its wheat exports south of the border. It would be unfair, they maintain, for a few farmers to skim off the cream of the market. They also insist that the agency needs to retain its monopoly: if farmers were free to sell elsewhere, the board might not have a secure supply and so could not pick and choose among the best markets, such as China and Japan, where longer commitments are usually necessary to win a contract. “Maybe a few individuals could access a market at a particular time,” says Harder. “But in the end, I can’t see that the majority of producers would get a better price, because they would be competing against each other.”

Some critics of the board, however, charge that the agency is not flexible enough to meet farmers’ needs. Those who want to get rid of the board’s monopoly insist that the agency will survive in a competitive environment. They also argue that potential investors in value-added industries—pasta plants, for instance—would be more likely to set up shop on the Prairies if they did not have to buy from a monopoly seller. In any event, farmers who advocate change say that they should have the opportunity to take advantage of price fluctuations. And there has always been a significant number of farmers who oppose the board’s monopoly for philosophical reasons. “The key issue,” says Alberta Barley Commission chairman Tim Harvie, whose group has long advocated a dual market, “is that farmers want choices. They should have the individual right to market their grain.”

Freedom was a recurrent theme at Sawatzky’s trial last week. ‘We don’t have a free country any more,” the Manitoba farmer told the court in his closing arguments. ‘This is oppression.” Sawatzky is facing two charges of exporting grain without a permit. He has admitted that he delivered wheat and barley to the United States in 1993 and 1994 without a licence. But he argued in court that Canadian law does not explicitly spell out the need for such a permit.

Sawatzky’s trial attracted farmers from both sides of the debate. At one point, about 80 of them gathered outside the provincial courthouse in downtown Winnipeg. Fred Tait, a grain farmer from Rossendale, Man., who wore a black baseball cap emblazoned with the board’s logo, later expressed his fear that if individual farmers were allowed to ship directly to the United States, they could provoke a backlash among American producers. Tait added that the current system of price pooling is fair to all. ‘Without the board, only the strongest will survive,” he said. “That’s not the way it should be.” The contrary position was put by Jim Pallister, Manitoba vice-president of the Western Canadian Wheat Growers Association. “A lot of people are uncomfortable with change,” Pallister argued. ‘Well, change is coming and they’re going to have to get used to it. We need change to release the entrepreneurial spirit of Western Canada.”

For all the battles raging around the Canadian Wheat Board, there are plenty of other changes already sweeping agriculture— changes that could eventually overshadow the current debate. Wheat will likely remain the single largest crop on the Prairies for many years. But it is becoming steadily less important. Daryl Kraft, a professor of agricultural economics at the University of Manitoba in Winnipeg, points out that the acreage devoted to canola has soared in the past five years, and that the demise of the Crow Rate—together with the potential growth in the livestock industry— means that farmers will be growing more feed grains for domestic consumption, which are outside of the board’s purview. “The wheat board,” Kraft says, “will become a relatively less important player in the merchandising of all Prairie crops.” For now, of course, it remains an important institution, the object of much emotional debate in an era of dramatic change.

DON MACGILLIVRAY

MARY NEMETH in Calgary with DON MACGILLIVRAY in Winnipeg

Average price paid to farmers per ton of No. 1 Canada Western Red Spring Wheat ‘Estimate 1989-90 1990-91 1991-92 1992-93 1993-94 *1994-95 SOURCE: CANADIAN WHEAT BOARD