The money, similar to what the former directors estimated, will cover open-market transition costs
The federal government will spend up to $349 million to cover the Canadian Wheat Board’s (CWB) extraordinary costs as it moves to an open market Aug. 1.
“The CWB must be as nimble, flexible and efficient as possible without being encumbered with costs related to the past,” Agriculture Minister Gerry Ritz said at a news conference at the CWB’s Winnipeg headquarters in Winnipeg June 28.
“We want to make sure it is a strong, viable option to allow western Canadian farmers and now all farmers across Canada with all commodities to make use of this and help drive their own economies.”
The former farmer-elected CWB board of directors asked for transition funding last fall, arguing since farmers didn’t vote for an open market farmers shouldn’t have to pay the extra costs.
The money will cover such things as employee severances, pensions and expenses related to fixed costs, such as the CWB’s upgraded computer system, which isn’t needed now that it won’t be marketing as much grain, said CWB CEO and president Ian White.
The CWB expects to have around 100 employees in the end, down from 400.
“These items will actually be further identified and worked on and we will be trying to make sure that we keep the costs as low as possible but obviously we’ve had to identify realistically what these costs could be,” White said.
The one-time federal payment doesn’t cover the CWB’s cost to buy two grain-hauling lake vessels ordered last year for $65 million, an official in Ritz’s office said.
Last summer then CWB chair Allen Oberg predicted winding down the CWB would cost “hundreds of millions of dollars.” Later the former board estimated, based on a study prepared by KPMG, it would cost between $276.3 million and $475.3 million. Ritz accused the board of exaggerating the expense to discourage moving to an open market.
“This shows our numbers were bang on,” former CWB farmer-elected CWB director Stewart Wells said in an interview June 29.
While pleased farmers aren’t on the hook, Wells said it’s an unfortunate expense for taxpayers.
“If you were going to an open market in an evolutionary way and the farmers had voted in favour of doing it I’m not sure all these costs would accrue,” he said.
There’s a possibility the federal government could get the money back. If the CWB is sold or wound down its assets go to the Crown.
The CWB is ready for business thanks to having a capital base (money from the CWB’s contingency fund), transition funding and handling agreements with a growing number of elevator companies, White said.
“It ensures the CWB will start off with the strongest possible footing under the new business model,” he said.
But Wells disagrees, arguing had the government not covered the costs farmers would have through the CWB’s pool accounts.
“This is not money that’s going to help the organization move forward,” he said.
The Western Grain Elevator Association opposes special treatment for the CWB. However, it understands Ottawa’s decision, said executive director Wade Sobkowich.
“We’re looking for an ultimate goal, which is an open marketplace without government assistance to any one entity,” he said.
“The government has decided to do this. We understand it’s a transition period. Obviously we don’t like situations that give a leg up to a competitor but they’re also partners with the grain industry so we understand what’s happening here.”
The Western Barley Growers Association (WBGA) and Western Wheat Growers Association (WCWGA) support the funding too.
“We take this as another positive sign that the government, like farmers, wants a viable and competitive CWB,” WBGA president Doug Robertson said in a news release.
This one-time cost to taxpayers will be recouped quickly because farmers will make more money in an open market, said WCWGA president Kevin Bender.
At a conference in Moose Jaw June 25 University of Manitoba agricultural economist Brian Oleson predicted a voluntary CWB will not survive.
“(There are) 10 reasons why there is no life after death for the Canadian Wheat Board,” he said. “Well, the single desk is dead and the other nine reasons don’t matter.”
According to Oleson the CWB can bring little value to farmers because it can not extract premiums.
“The CWB can operate effectively in a market-choice environment with the right people and the right attitude,” former Western Canadian Wheat Growers Association president Cherilyn Jolly-Nagel said.
White says the board can be of value by providing farmers with a pooling, a form of risk management and through its long-term relationships with customers around the world.
During a telephone meeting with 2,000 farmers June 29, 57 per cent said they would do business with the new CWB, said spokesperson Maureen Fitzhenry.
The CWB called 45,000 farmers last week to see if they’d participate in the hour-long meeting during which the CWB explained its new marketing options and took questions, she said.