Is the Canadian wheat grading system under attack?
That’s the concern being raised by former NFU president Stewart Wells, who says the U.S. has painted a target on it, and the local grain trade is helping them zero in.
Wells wrote about his concern for the nation’s quality brand in an op-ed released Oct. 11 and in a followup interview the same day.
Canada’s grain industry says the grading system isn’t threatened, but warns if American wheat imports aren’t treated equitably, Canada risks losing access to the U.S., its best wheat market.
“For wheat and durum, this is our No. 1 market,” Cam Dahl, president of Cereals Canada, which represents the cereals industry, including farmers, said in an interview Oct. 12. “There is no other market that is bigger.
“So if there are trade irritants with one of our best customers it’s prudent to look at that and see if we can resolve them.
“If we don’t address irritants and they turn into trade barriers… the cost to Canadian producers would be enormous.”
The National Association of Wheat Growers (NAWG), which represents American wheat farmers, complains Canada discriminates against their wheat, contrary to trade rules. Canada’s wheat industry agrees.
Canadian grain companies can buy American wheat using specifications, but not with an official Canadian Grain Commission (CGC) grade. NAWG says American-grown wheat registered in Canada should be eligible for an official grade.
The Western Canadian Grain Elevators Association (WGEA), which represents Canada’s major grain companies, agrees, executive director Wade Sobkowich, said in an interview Oct. 11.
Faller wheat is an example. It’s an American variety registered and grown in Canada and in the CGC’s new Canada Northern Hard Red wheat class.
If a variety isn’t registered in Canada it would remain ineligible for a CGC grade. NAWG accepts that because the same applies to a Canadian farmer delivering an unregistered variety.
Getting a CGC grade was more important under the Canadian Wheat Board, dissolved in 2012. That’s because unregistered wheats were only eligible for the lowest grade in the intended class, which meant getting the lowest price from the board. But in an open market grain buyers can negotiate the price with sellers.
Canada’s grain industry doesn’t expect accommodating American wheat will result in additional American wheat exports to Canada because most U.S. farmers can get better returns in the U.S., Dahl said.
Canadian millers can import as much American wheat as they like, Wells wrote. But he claimed if American farmers deliver wheat to Canadian elevators it would get mixed with Canadian wheat, undermining Canada’s reputation.
“Shady marketing will sell this grain as ‘Canadian origin’ which would give corporate profit a short-term boost, until the world recognized that this grain is not really the superior, or unique, Canadian wheat they were expecting,” he wrote. “In short, our much diminished Canadian market power would suffer another serious blow.”
Dahl disagrees. If an American wheat, registered in Canada, meets the CGC grade standard in its class, it will be of equivalent quality as Canadian wheat, he said.
Under Canada’s wheat quality control system only varieties that have been tested for at least two years, and meet the class quality standards, are recommended for registration.
There’s added protection under the Canada Grain Act, CGC spokesman Remi Gosselin said.
“Canadian grain handlers can mix any amount of American grain with Canadian grain and market on the basis of buyer specs and requirements,” Gosselin said in an interview Oct. 12. “In this situation the grain would be sold as mixed Canadian and foreign grain… and has to be labelled as such. The grain handlers also have the option to segregate American grain upon delivery if they don’t want to sell the shipment as mixed Canadian and foreign grain. U.S.-origin grain can be exported as IP (identity preserved) with no requirements for official CGC inspection or weighing.
“U.S. grain can move through Canada. There are no restrictions on it. It has in the past and it is continuing today…”
In an interview Wells said the current system offers protections, but worries they, along with the CGC, could be negotiated away during the current NAFTA talks.
The Canadian wheat system, including the CGC and the maximum revenue entitlement (MRE), which prevents the railways from gouging farmers when shipping grain, is worth about $70 a tonne to farmers or about $1.75 billion annually, Wells said.
Grain companies, some of which operate on both sides of the border, have a financial incentive to weaken or eliminate Canada’s grading system and the CGC, he claimed (see sidebar).
“Most people don’t think about how interconnected all this stuff really is,” Wells said. “You change a rule here or there, what are the ramifications for the rest of the system? That’s what I want to flag with this op-ed. I want to get people thinking more about it.”
Grain companies support the wheat class and quality control system, Sobkowich said.
“We use that to sell,” he said. “It makes it easier to segregate in a bulk handling system. It keeps our cost lower and allows us to give our customers what they need.”
Even if grain companies wanted to take advantage of farmers, competition wouldn’t allow it, Sobkowich said noting there are new entrants, such as G3 and GrainsConnect.
“Competitive factors are really the protection farmers have to ensure they are getting the best value for what they grow,” Sobkowich said. “That’s not going to change regardless of what happens to the wheat grading system.”