There are times in life when you like to be proven wrong, like when you take your wailing newborn to the hospital emergency ward in the middle of the night fearing something is terribly amiss. In that situation, it’s a huge relief to be told you are mistaken.
And there are times when any pleasure that comes from being right are hollow and fleeting, like being able to say “I told you so,” after someone close to you has failed to heed your warning about the dire implications of a proposed course of action.
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It’s in this context that we view the recent developments in grain marketing in Western Canada.
The Federal Court of Appeal has ruled against the farmers and former directors who believe the federal government went about ending the Canadian Wheat Board’s single-desk monopoly in the wrong fashion. Morally, they are correct. Promises were made by previous governments and the Harper government has failed to live up to them. However, barring a successful challenge to the Supreme Court of Canada, the courts so far are siding with parliamentary authority to remove the board’s marketing authority without consulting farmers.
This newspaper has always taken the position that moving to the open market will place farmers at a competitive disadvantage. But we have also held the view that Parliament has the power to make these changes. So we are now in the awkward position of wishing we were wrong and taking no pleasure in the words “told you.”
Even if this case had been successful, it would not have prompted a change of heart, only a delay in the outcome. So, as of August 1, Canadian farmers have their marketing freedom.
For the new CWB, it creates the necessity of negotiating with the grain companies that are now its competition for access to the grain-handling system. Contrary to what some predicted, it has been able to announce negotiated agreements with several handlers to date, and it is optimistic for more. It is a significant achievement and it makes it possible for farmers across the Prairies to deliver, if they choose to continue selling through the board.
The board’s only negotiating advantages are its potential for providing increased volume to these companies and its long-standing international connections with customers.
Chicken and egg
But its volume will only be there if farmers choose to participate in the voluntary pools. The board can’t sell grain it doesn’t have, yet until a week ago, farmers didn’t know whether the board would be able to take delivery.
The board is stressing farmers can sign up for the pools at no risk and they should do so soon. There is an Act of God clause that gives them an out if they suffer a crop failure and they can readily opt out of the pools for cash contracts.
What happens if farmers sign up for the pools and the cash market spikes? If farmers pull out of the pool, the board must enter the cash market to source the volume it needs to fill its sales commitments and then arrange for transportation through the same companies it had to outbid to get the stocks. Even with taxpayer backing over the next five years, it’s not a strong business case.
International customers now know they can shop around for the same Canadian quality that was once only available through the board. The board was able to announce a sale to Japan last week, but it’s only for half of CWRS wheat it will buy for the first half of the crop year. That implies the Japanese are being astute — hedging their bets and shopping around.
It’s clear that those who pushed so hard to get the CWB out of their way, now have their sights set on the Canadian quality system. Based on evidence that is largely anecdotal, they are calling for access to “higher-yielding” American varieties and less emphasis on quality in favour of better yields.
Again, maybe we’ll be proven wrong on this, but it is counterintuitive to suggest that medium-quality milling wheat produced in Western Canada is going to have enough of a yield advantage to make it competitive against medium-quality wheats grown in parts of the world where seasons are longer, the soils are naturally more fertile and they are closer to markets.
The Canadian Grain Commission has recently gone on the offensive with webinars and seminars explaining how the varietal system works and why its focus on quality works to Canadian farmers’ advantage in export markets.
We’d like to be wrong. But even with these recent accomplishments, the notion of a “strong, viable wheat board,” is a mirage that will disappear in about five years. And the pressure to dismantle Canada’s quality reputation is gaining momentum.
