Kevin Libin, National Post
Published: Thursday, August 07, 2008
CALGARY -For 73 years, the Canadian Wheat Board swore there was strength in numbers; that Western farmers, as a band of grain-pooling brothers, could stand firm against the exploitations of speculators and corporations; that as one of the world's biggest grain marketers, its clout commands premiums. Announcing last week that the board projects a record $7-billion in revenue this year, chairman Larry Hill handed credit directly to monopoly power. The "CWB was able to leverage its role as a single seller ... to achieve strong values for farmers" boasted his press release.
A new study by one of the world's top agronomics firms, Informa Economics, though, suggests the CWB isn't so mighty after all. Commissioned by the Alberta government and released the same day as Mr. Hill's announcement, it concluded the board succeeds no better than your average schmo when it comes to grain marketing. More damning, it calculates that growers would have gotten richer over the past several years from the open market, rather than being forced to sell to the board.
Freeing farmers from the CWB's monopolistic grip has been the federal Conservatives' plan since they were elected in 2006, rooted in Reform Party principles that Westerners deserve the same rights as their Eastern peers to freely sell a product of their labour. So far, their efforts have been frustrated. But this latest report may offer the most powerful ammunition yet in undermining the Canadian Wheat Board's entire raison d'etre.
"If you could show that year in, year out they get a higher return you might be able to argue, 'Well maybe there is a case for denying individual freedom,' " says Blair Rutter, executive director of the Western Canadian Wheat Growers Association, a pro-marketing-choice group. "If you can't even demonstrate that they get an above-average return, then what's their justification?"
The CWB has studied the report for the past several days, preparing its response. In an e-mail, spokeswoman Maureen Fitzhenry said it may come as early as today and "would certainly refute its main conclusion."
This will be a tough thing to dismiss, though. Informa's reputation is as a top authoritative source for agronomics analysis. Based in Memphis, British owned, it has no dog in this policy fight; its good name (its parent firm is traded on the London exchange) is surely worth more than scoring political points in Canada with faulty studies.
Economists used a treasury of grain pricing data from the UN, USDA and published elevator and gate prices to analyze wheat board profitability using three different models (the CWB refused to share its own confidential sales figures, but controlling 95% of Canadian wheat and barley exports, national statistics come close). Every which way, the study found board taking home prices that, over time, came up short.
If the CWB ever was a market mover, it is no more, says David Reimann, Informa's vice-president. Producers in the former Soviet bloc export more wheat. Americans, too. Western Canada, suffering a heavier drop in wheat acreage than any exporting jurisdiction, slipped from 20% world market share in 1995 to 14%. Canadian barley, just 11%. "The CWB's relatively small share in the international market means it is unable to exert any real influence over global prices," the report states. It is a "price taker" -- meaning it gets the going rate. Anyone can manage that. And without the inefficiencies of the single-desk system, the authors estimate, Western producers could have made $2.25-billion-$3-billion more over the last five years in the open market.
That's Alberta's interest in fact-checking the CWB's claims, spending $50,000 on the report to do it; its producers have long favoured marketing choice (Saskatchewan recently joined the campaign, too, leaving Manitoba's NDP the board's only provincial ally). "The evidence is that the current system is costing [farmers] money," says Alberta Agriculture spokesman Lucas Warren. "We want to provide the best economic opportunity for them."
The federal Conservatives' approach, though, has faced accusations of being more ideological than practical. Attempts to, as a first step, let barley farmers opt out of the CWB have been thwarted by an aggressive, activist board. Directors overturned the government's tries at regulatory changes in court. Opposition parties refuse to support legislation deregulating barley, persuaded by the CWB that a majority of producers prefer the status quo and believe it makes more than going it alone.
But the board's own surveys have shot the first claim: 67% of barley farmers polled this year oppose its monopoly. And if the CWB can't offer one heck of a compelling argument to controvert Alberta's new and potent evidence that board collectivism actually hurts farmers, not helps them, it's going to have a tough time selling its strength in numbers story any longer.
Published: Thursday, August 07, 2008
CALGARY -For 73 years, the Canadian Wheat Board swore there was strength in numbers; that Western farmers, as a band of grain-pooling brothers, could stand firm against the exploitations of speculators and corporations; that as one of the world's biggest grain marketers, its clout commands premiums. Announcing last week that the board projects a record $7-billion in revenue this year, chairman Larry Hill handed credit directly to monopoly power. The "CWB was able to leverage its role as a single seller ... to achieve strong values for farmers" boasted his press release.
A new study by one of the world's top agronomics firms, Informa Economics, though, suggests the CWB isn't so mighty after all. Commissioned by the Alberta government and released the same day as Mr. Hill's announcement, it concluded the board succeeds no better than your average schmo when it comes to grain marketing. More damning, it calculates that growers would have gotten richer over the past several years from the open market, rather than being forced to sell to the board.
Freeing farmers from the CWB's monopolistic grip has been the federal Conservatives' plan since they were elected in 2006, rooted in Reform Party principles that Westerners deserve the same rights as their Eastern peers to freely sell a product of their labour. So far, their efforts have been frustrated. But this latest report may offer the most powerful ammunition yet in undermining the Canadian Wheat Board's entire raison d'etre.
"If you could show that year in, year out they get a higher return you might be able to argue, 'Well maybe there is a case for denying individual freedom,' " says Blair Rutter, executive director of the Western Canadian Wheat Growers Association, a pro-marketing-choice group. "If you can't even demonstrate that they get an above-average return, then what's their justification?"
The CWB has studied the report for the past several days, preparing its response. In an e-mail, spokeswoman Maureen Fitzhenry said it may come as early as today and "would certainly refute its main conclusion."
This will be a tough thing to dismiss, though. Informa's reputation is as a top authoritative source for agronomics analysis. Based in Memphis, British owned, it has no dog in this policy fight; its good name (its parent firm is traded on the London exchange) is surely worth more than scoring political points in Canada with faulty studies.
Economists used a treasury of grain pricing data from the UN, USDA and published elevator and gate prices to analyze wheat board profitability using three different models (the CWB refused to share its own confidential sales figures, but controlling 95% of Canadian wheat and barley exports, national statistics come close). Every which way, the study found board taking home prices that, over time, came up short.
If the CWB ever was a market mover, it is no more, says David Reimann, Informa's vice-president. Producers in the former Soviet bloc export more wheat. Americans, too. Western Canada, suffering a heavier drop in wheat acreage than any exporting jurisdiction, slipped from 20% world market share in 1995 to 14%. Canadian barley, just 11%. "The CWB's relatively small share in the international market means it is unable to exert any real influence over global prices," the report states. It is a "price taker" -- meaning it gets the going rate. Anyone can manage that. And without the inefficiencies of the single-desk system, the authors estimate, Western producers could have made $2.25-billion-$3-billion more over the last five years in the open market.
That's Alberta's interest in fact-checking the CWB's claims, spending $50,000 on the report to do it; its producers have long favoured marketing choice (Saskatchewan recently joined the campaign, too, leaving Manitoba's NDP the board's only provincial ally). "The evidence is that the current system is costing [farmers] money," says Alberta Agriculture spokesman Lucas Warren. "We want to provide the best economic opportunity for them."
The federal Conservatives' approach, though, has faced accusations of being more ideological than practical. Attempts to, as a first step, let barley farmers opt out of the CWB have been thwarted by an aggressive, activist board. Directors overturned the government's tries at regulatory changes in court. Opposition parties refuse to support legislation deregulating barley, persuaded by the CWB that a majority of producers prefer the status quo and believe it makes more than going it alone.
But the board's own surveys have shot the first claim: 67% of barley farmers polled this year oppose its monopoly. And if the CWB can't offer one heck of a compelling argument to controvert Alberta's new and potent evidence that board collectivism actually hurts farmers, not helps them, it's going to have a tough time selling its strength in numbers story any longer.
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