Allies and Foes

It looks like the era of the Canadian Wheat Board (CWB) is over. The follow-up question – asked by Allan Dawson in the Sept. 22 edition of the Manitoba Co-Operator –”Is Supply Management Next?”

Dawson points out that supply management’s critics “are sharpening their knives.” The criticisms from big business, academics and media are long-standing and well known. To date, the federal government has rebuffed them. It stood by supply management during the Doha Round of trade talks at the WTO and the federal agriculture minister has been vocal in its defence and support of supply management.

It is most unlikely that Gerry Ritz or other cabinet members will eat all their recently spoken words.

But that doesn’t mean the threat is gone. The grain farmers that support the CWB were among the few staunch agricultural allies of supply management. When the CWB is gone, allies could be hard to find. Today, that likely doesn’t matter. But Ritz won’t be around forever. In three or four years the political climate may be different and supply management may have to look long and hard for support.

What is happening to the CWB now may be instructive as to what could face supply management down the road.

The current Conservative government has a majority in Parliament and members from the prime minister on down
have long pledged to end the wheat board’s export monopoly by introducing and passing new legislation.

Throughout this debate schools of red herrings have been sighted, for example, the idea that the CWB can continue without its export monopoly and the single desk. Something called the Canadian Wheat Board might continue, but without the export monopoly and the single desk a new CWB would be entirely different. It would be like passing a law that says in future ants will be called elephants.

The current farmer-elected majority on the CWB’s board of directors has studied the issue and sees no future for the wheat board and price pooling without single-desk control of exports.

Price pooling can mitigate the risks of delivering and selling grain on the wrong day or in the wrong month. For example, the United States Department of Agriculture (USDA) reports that the average wheat price received by U.S. producers of hard red spring wheat was $4.59 US a bushel in June 2010. By May 2011 the price had risen to $8.95. In October and November 2010 (when a lot of farmers would be delivering the recently harvested crop) the price was $6.19 and $6.41 respectively. The average price for last crop year was $6.54.

In 2010-2011: Prairie farmers have received $8.42 a bushel for No. 1, 13.5 per cent protein so far. A final payment is still to come. Even Canadian Prairie farmers who delivered No. 3 hard red spring wheat with 12 per cent protein in the 2010-2011 crop year have received $6.72 a bushel so far. A No. 3 with less than 12 per cent protein received $6.49 a bushel.

Could any of these Canadian farmers have received a better price from spot U.S. elevator prices? Maybe. But they would have to have had near perfect timing.

Dan Morgan, in his classic Merchants of Grain, laid out the situation in 1975. Describing wheat marketing in North Dakota, he wrote, “They [farmers] were gambling all the time.” He described a situation where wheat prices “change rapidly, even crazily.”

“It was,” he wrote, “agricultural roulette.”

Meanwhile, just across the border in Canada, the farmers seemed relaxed. “In the parts of the Canadian Prairies I visited, the Wheat Board was popular – a seemingly permanent institution that is working well.” 

Little has changed in the past 35 years except the government. The Americans are still gambling and the wheat board remains popular.

Meanwhile, on the barley side, the financial story is much the same. Professors Andrew Schmitz and Troy G. Schmitz published a study in January of this year that showed “the introduction of multiple sellers would have resulted in an annual average loss of $107 million in revenue accruing to western Canadian barley farmers.”

The numbers are stark. But so is the political reality. Prairie wheat and barley farmers will have marketing freedom. Some may do a very good job of timing the market and take a bigger slice of the pie. But it looks like it will be a smaller pie.

Meanwhile, the government has dismissed the results of a CWB plebiscite.

In that vote, 62 per cent of wheat producers said they wish to maintain the ability to market wheat through the CWB single-desk system and 51 per cent of barley producers also said they want to keep the CWB.

Supporters of supply management should take note. In the case of the CWB, superior returns and the support of a significant majority of wheat producers was not enough to fend off a determined government. Would supply management fare any better?