One almost hesitates to say the words “wheat board” these days, as regardless of how you felt about the pros or cons of the single desk, you’re probably relieved that you don’t have to fight about it anymore.
And regardless of how you felt about it, the old board is never coming back. But while there’s no point in fighting old battles, it’s worthwhile reviewing what’s happened after a year and a bit of an open market.
That’s prompted by the recent sale of the farmer-owned Lethbridge Inland Terminal in Alberta and the announcement that Weyburn Inland Terminal has put itself on the block.
For those of us who’ve been around for a while, the latter news is somewhat ironic, as we remember some of the ragtag bunch who were responsible for getting Weyburn built in the 1970s. They had an almost pathological hate of the CWB, and their main motivation for building the terminal was as a way of freeing themselves from its evil talons. After a rocky start and a change to directors and management with a more practical approach, Weyburn went on to great success. Now, after a year without the single desk, Weyburn is throwing in the towel.
But it turned out that part of that success was due to the CWB, as it was for other farmer-owned terminals that were built after. Groups of Prairie farmers, no matter how astute, can simply not play in the export wheat and barley business. They don’t have access to the massive amount of cheap capital required, nor can they handle the risk if things go wrong in a low-margin business. Just ask anyone paying demurrage on vessels at the West Coast these days, plus the interest on the value of the cargo and any penalties for not delivering on time.
With the old CWB, these farmer-owned companies had both a banker with access to the world’s cheapest capital guaranteed by the Canadian government, and an export sales agent taking all the risk. Along with that they had guaranteed access to export terminals, even those owned by their larger competition. With good management in buying grain in the country, the independent terminals could compete.
These companies have now lost their banker and sales agent, and while they have some terminal access through their investment in the Alliance Terminal at Vancouver, most of it is owned by the competition — Viterra, Cargill and JRI. They would just as soon handle the grain themselves.
Which is fine — business is business. The rules have changed, and now everyone has to play by them.
That brings us to the question of the new CWB versus the old Canadian Wheat Board. Again, let’s not revive old battles, but it will be recalled that single-desk opponents claimed that a change would be no big deal, implying that the board would retain much of the business while the companies would nip at its heels and keep it honest.
That didn’t happen. The companies have taken the lion’s share of the business.
Which raises the question of the role for the new CWB. The definition of an open or free market is not the absence of rules. It’s whether everyone plays under the same rules, and whether you liked them or not, that was the case under the old wheat board.
We now have new rules, where all the companies have to compete on an equal basis — except CWB Ltd. It was given access to government-guaranteed capital for five years, and that guarantee presumably applies to trading losses as well as to any facility purchases. Last year it purchased Mission Terminals, and while it’s just speculation, it’s rumoured that it may be one of the bidders for Weyburn Inland Terminal.
Oddly, the Mission Terminal purchase was met with a deafening silence. Grain companies seemed to say nothing, perhaps not wanting to be accused of sour grapes. Some of the old single-desk opponents privately admitted that they didn’t like it, but that it was a small price to pay for realizing their goal. The federal government has apparently gone along with it, presumably for the same reason.
If so, there’s not much point. It won’t win back former CWB supporters. They were asking to keep the single desk, not for another grain company, and there is no evidence that one is needed — or at least, that any other than a large company can survive in the new environment. It’s unlikely that the new CWB will ever be large enough after it loses the government guarantee. In the interim, it shouldn’t be using it to compete with private companies, especially if it makes things more difficult for the ones that remain Canadian owned.
It’s tough to see the loss of independent terminals, but in the post-single-desk world, it seems you have to be tough to survive.