The federal government must demonstrate the Canadian Wheat Board’s (CWB) long-term viability in an open market or take responsibility for winding it down, says Keystone Agricultural Producers’ president Doug Chorney.
“Show me a business plan that the wheat board is actually going to function in a dual market,” the farmer from East Selkirk said in an interview last week. “If it can’t work, don’t pretend that it’s a reality. It’s not fair to the employees, it’s not fair to farmers, it’s not fair to grain companies. Let’s get on with it. If the wheat board is gone, let’s make it be gone.”
Chorney said the government could leave the single desk intact but loosen the rules regarding export permits as an alternative. Farmers and grain companies could export on their own if they demonstrated they’ve found a higher return than the wheat board is offering.
“That would provide some stability and control of in-country handling of grain,” he said. “Producers would still be able to access producer cars and guys can still find markets on their own.”
The challenge would be determining who should get no-cost export permits to prevent sellers from undercutting the CWB, he said.
“But I’m sure that can be worked out,” Chorney said. “It would provide some semblance of order.”
The CWB grants export permits now if the sale isn’t undercutting its markets, but farmers must first sell to the CWB and then buy their grain back.
However, the federal government has committed to an open market.
Newly reappointed Agriculture Minister Gerry Ritz said last week the government will introduce legislation this fall to end the CWB’s 68-year-old monopoly over the sale of western Canadian wheat and barley destined for export or domestic human consumption effective Aug. 1, 2012.
Ritz said the CWB can survive as a voluntary pool marketer of farmers’ grains, in competition with grain companies, adding government will look at all the CWB’s roles in considering its future.
“But at the end of the day, certainly there is a role for the wheat board to play,” Ritz said. “We’ll have to work out just exactly what that is.”
CWB chair Allen Oberg says the CWB might survive as a grain broker, but it won’t be like it is now. It will be a grain company without any country or terminal elevators and no working capital since all revenues, less expenses, are returned to farmers.
Chorney is also worr ied about the ripple effect the possible demise of the CWB could have. The CWB takes delivery of producer cars, which grain companies seldom do. Farmers have invested millions of dollars buying short-line railways to transport mainly producer cars. They’ve also built producer-car loading sites.
The CWB also helps fund the Canadian International Grains Institute and Western Grains Research Foundation.
The government is proposing changes that could leave farmers on the hook for covering CWB employee severances and other wind-down costs, he said.
“This is not government deciding to do things with government assets, it’s government deciding what it will be doing with farmer assets.”
A task force struck by the Harper government in 2006 to study the CWB’s transition to an open market concluded what it called “CWB II,” might not survive.
“The task force recognizes that the ending of the monopoly powers is a significant change…” its report states. “There is a significant risk of its failure.”
The task force also said change should not be considered a “dual market,” but “marketing choice.”
“The latter term implies to some that the existing marketing approach – a CWB with monopoly powers – could coexist with an open-market approach,” the report says. “This is not possible.”
The task force recommended the CWB be converted to a farmer-owned grain company. The government would take over the CWB’s liabilities from export sales made with government credit. Some portion of the CWB’s accounts receivables and cash/deposits would be transferred to the government with the remaining portion transferred to the CWB II to a maximum of $75 million.
The government would continue to guarantee CWB II borrowing up to a limit of $200 million for two to five years assuring farmer payments. Following the transition government support would end.
Meanwhile, the National Farmers Union (NFU) says the single desk should remain because it provides a net gain to farmers of $1.5 billion a year.
The Canadian Wheat Board Alliance (CWBA) says the government doesn’t have a mandate to remove the CWB’s monopoly.
Ritz says the government’s mandate came by winning a majority in the election May 2. [email protected]
“Thisisnotgovernment decidingtodothings withgovernment assets,it’sgovernment decidingwhatit willbedoingwith farmerassets.”
– doug chorney