There’s an old saying that goes something like this: be careful what you ask for ’cause you just might get it.
I’m often reminded of that saying when I get into discussions with people who want to get rid of the Canadian Wheat Board’s single-desk powers. For them, the board is a monopoly buyer of our grain. Getting rid of the board’s monoply, in their minds, would make for more competition, more buyers, more options and ultimately better prices.
I don’t share their optimism. On the contrary, everything I see in the other export-based commodities here on the Prairies tells me that, when no one else is looking after their interests, producers end up with very few marketing options. The level of concentration in the red meat sector, for example, is frightening. Producers only have the choice between a couple of domestic processors for both their cattle and their hogs.
While they have the freedom to market anywhere in the world, the fact is that the vast majority of their exports go to the U. S. with the unfortunate consequence that, as soon as that market dries up, these industries fall into total disarray. This happened with the BSE crisis and it is happening again today, with country-of-origin labelling.
It’s no accident that the Prairie grain industry has evolved differently. There’s been a conscious decision on the Canadian Wheat Board’s part to service a variety of export markets, not just our neighbours to the south. It has also been board policy to do business with a variety of industry partners, including the Port of Churchill and all the players at Thunder Bay, not to mention big and small companies with facilities in the country, including producer car loaders.
Take away the board’s monopoly powers and the same forces that have shaped the red meat sector in Western Canada will go to work on grain producers. Competition, far from benefiting from dereguation, will be its first victim. The orderly approach to selling grain will give way to a short-sighted strategy that emphasizes immediate benefits over long-term marketing risk management.
We’ll end up with fewer – not more – alternatives, both in terms of our client base and the companies that handle our crops.
It’s become clear to me that the move to get rid of the board’s single-desk powers stems, for the most part, from a fundamental misunderstanding. Some people just don’t see the difference between a buyers’ monopoly and selling to multiple buyers through one agent – in this case, the Canadian Wheat Board.
Now, the board doesn’t hold a monopoly over all grain sales. We still have to compete with the Americans, the Europeans, the Argentines and the Australians – not to mention the wheat and barley producers in countries we used to call the minor exporters. But there are customers throughout the world who want western Canadian wheat and barley and they are willing to pay more for it than grain from other origins. In these markets, it pays to have one agent and only one because then, Prairie grain producers aren’t competing with each other and driving the price down.
It’s an approach that works. It works with wheat and barley in Western Canada, it works with root crops and potatoes in Manitoba (Peak of the Market is another single-desk seller) as well as many other commodities throughout the country. It works for labour unions. It works for OPEC. It works for major companies throughout the world, including many that sell us our seeds, our fertilizer, our fuel and our machinery, that have used mergers and takeovers to gain a dominant position in their respective markets.
When it comes to their farms, grain producers are hard-nosed business people. I like to think I’m no exception. I support the single desk because I think it makes me money. As a director on the Canadian Wheat Board, I get to see the books and sales values that we achieve compared to the competition. I can say unequivocally that I’ve seen proof, over and over again, that there are markets where we get more money for our grain because we have one agent negotiating for us. In those cases the monopoly is a very good thing because it is working for us, not the buyer, and being on the right side of that equation is something you can only get from a single desk.
So, next time someone tells you they want to end the CWB’s monopoly in order to bring more competition and higher prices to the western Canadian grain industry, make sure to ask them if they’ve really thought this thing through. They might end up with a very different result than what they had originally hoped for.