Agriculture Minister Gerry Ritz says the Canadian Wheat Board can survive in an open market, but it’s up to the board and the industry to figure out how.
Ritz arrived for a half-hour visit at the board May 30 – his first-ever foray into its downtown offices – to inform officials there what he had already told the media: that the board’s monopoly will end in 2012.
Ritz maintained last week that CWB will continue to be a marketing option for farmers after the government ends the board’s statutory monopoly in 2012 over the sale of western Canadian wheat and barley destined for export of domestic human consumption.
In an email last week Ritz said the entire grain industry is working on a strategy.
“Our government wants the CWB to be a strong, viable option and we made it clear that we want the board to take a key role in bringing forward any and all ideas that can help the transition,” Ritz said. “The viability of the CWB now rests with the ability of the board to move forward and work with us to ensure that all western Canadian grain farmers have marketing choice.”
CWB chair Allen Oberg says it’s the federal government’s job to help the board transition from a single-desk seller to a new entity. After all, it’s the federal government that’s removing the CWB’s 68-year-old marketing mandate effective Aug. 1, 2012 without putting it to a vote of western Canadian grain farmers as required under the current CWB Act.
A new grain company able to compete with existing firms, including Viterra, Cargill and Richardson International, requires access to significant capital, country elevators and port terminals, none of which it has now, Oberg said May 31 in an interview after Ritz’s visit.
“All we’re saying is, if there was a new entity created that would have any chance of survival, this at a very minimum, is what would be required,” Oberg said. “It will be the government’s responsibility to figure it out.”
The CWB, which was created in 1935, is not a grain company and therefore has no retained earnings, he said.
Cargill’s recent purchase of the Australian Wheat Board, which had been operating as a grain company, demonstrates the CWB’s future isn’t guaranteed, Oberg said.
Meanwhile, grain companies say there should be no special assistance given to help the board become their competitor.
“It is important that the transition to an open market be made on strict commercial terms,” the Western Grain Elevator’s Association says in a letter to Ritz. “None of the participants – including the CWB – should be granted an advantage over other participants in the marketplace through legislation or government funding.”
Converting the CWB into a farmer-owned co-operative is an option, but it’s unclear how many farmers would pony up. The CWB has always said its main benefit to farmers comes through its single desk. Even if farmers prefer to keep the CWB in some form are they willing to put millions of dollars at risk?
Most still recall the demise a decade ago of the three Prairie Pools, co-ops that dominated Canada’s grain industry for 70 years.
Oberg said the farmer-elected directors have a responsibility to farmers and staff to hold the federal government responsible for its decision.
“As a board, not only do we have a fiduciary responsibility to farmers but to staff. In any organization of our size there are some ongoing liabilities that I believe farmers should not have to have to pay for because this is an action that has been precipitated by the government and not by farmers. We have an obligation to make sure that that is covered off by the federal government and not by farmers.”
Liabilities include staff pensions and severances, he said.
Oberg said Ritz formally informed him last week during their half-hour meeting that the government will introduce legislation to end the CWB’s single desk and there won’t be a farmer plebiscite first.
“It seems in all of this the timeline and the end result has been clearly laid out, but it became clear to me that very little analysis, if any, has been done on some of the implications of these changes, which will be irreversible,” Oberg said.
It will be too expensive to restore the single desk because under the North American Free Trade Agreement grain companies would have to be compensated for lost profits, he said.
Other casualties include producer cars, short-line railways and the Port of Churchill, Oberg said.
Currently the CWB takes delivery of almost all producer cars because there’s no economic incentive for grain companies to do so. If producer cars aren’t viable, short-line railways and producer car loading sites are at risk.
The CWB is also the only grain exporter shipping through Churchill. [email protected]
– WESTERN GRAIN ELEVATORS ASSOCIATION