The Canadian Wheat Board (CWB) will be “wound down” if the federal government delivers on its promise to end the board’s single-desk marketing authority next Aug. 1, says CWB chair Allen Oberg.
Ottawa, not farmers, should cover the millions of dollars in costs, including employee severances, pensions and delivery contact defaults, the board said in a letter to the government sent late last month, Oberg said.
“If the single desk is removed, the current organization will be wound down,” Oberg said in an interview Aug. 4. “It will cease to exist. A new organization may or may not be created. It’s up to government to decide what type of commitment they have to providing assistance for that happening. With no assistance I think the odds of that are rather remote. “There’s no way that a successor organization could assume all the ongoing liabilities and windup costs. It would be in a difficult position as it is.”
The CWB doesn’t own any country or port grain-handling facilities. The CWB also has no retained earnings because all revenues, less expenses are returned annually to farmers.
A research paper by University of Manitoba economist Milton Boyd released by the Frontier Centre for Public Policy flags that issue and others as serious challenges for business models proposed to replace the CWB. (See pg. 4.)
The federal government currently guarantees the CWB’s borrowings, but grain companies say that should stop because it would be an unfair advantage.
Agriculture Minister Gerry Ritz has said he’ll consider helping the CWB’s successor get on its feet, but won’t write a blank cheque.
The CWB has explored 19 models ranging from the status quo to shutting down, Oberg said. None delivers as much value to farmers as the current model based on the CWB being the only seller of western Canadian wheat and barley destined for export or domestic human consumption.
The CWB would provide some benefit to farmers if it retained a monopoly on wheat and barley exports, Oberg said.
“There would be a reduction in value no doubt because the domestic market is a premium market and that would be given up,” he added.
It would also allow the CWB to keep operating much the way it does now, giving it more time to make the transition to a full open market, Oberg said. But that doesn’t appear to be an option, he added.
KPMG has reviewed the CWB’s calculations on shutdown costs. The consulting firm has also reviewed the CWB’s options for a new grain-marketing entity.
“What’s really crucial here is the timeline is so short,” Oberg said. “That new organization, if it’s going to get up and running and start making sales, needs to be in place shortly after the new year otherwise it’s going to miss out on a whole year of sales and it would be in a very difficult spot,” he said “All those sales contacts and a lot of the expertise the organization currently has would likely not be there.
“Customers aren’t panicking yet but they have concerns about quality, supply concerns and there are so many unanswered questions out there.”
NO FARMERS OR CUSTOMERS
The industry working group Ritz appointed to assist in the transition to an open market doesn’t have much time either, Oberg said. Its final report is due Sept. 15. With legislation to repeal the CWB Act expected in October Oberg wonders how much of what the committee recommends will be reflected in the bill.
Oberg is also concerned with the lack of farmers on the committee.
“The people who will be most affected by the changes don’t seem to be represented,” he said.
Agriculture and Agri-Food Canada Deputy Minister John Knubley chairs the committee formed July 5. Other members include Richard Phillips, executive director of the Grain Growers of Canada, Jim Everson, vice-president, corporate affairs of the Canola Council of Canada, Gordon Bacon, CEO of Pulse Canada, Earl Geddes, executive director of the Canadian International Grains Institute, Murdoch MacKay, a commissioner with the Canadian Grain Commission, Paul Earl, assistant professor of supply chain management at the University of Manitoba and Howard Migie, a retired senior employee with Agriculture and Agri-Food Canada.
The CWB was invited to cochair the committee, but declined because it didn’t feel it was appropriate, Oberg said. The CWB’s offer to be a committee resource was rejected, he said.
In the meantime, the CWB is urging farmers to vote in its plebiscite.
“It’s really the only leverage the farmers have to influence the future of the board and that’s why it’s important that they vote no matter what their opinions are on the CWB,” Oberg said.
Aug. 3 the CWB held a “virtual” town hall meeting via telephone with almost 18,000 CWB permit book holders on the line at one time.
“It’s a pretty reasonable way to communicate with farmers,” Oberg said. “To get that many people out in person it would take quite a number of meetings to accomplish that.”
The CWB launched a series of Prairie-wide meetings this week inviting farmers to discuss the CWB’s future. [email protected]