Farmers for economic freedom

Updates from the Canadian Farm Enterprise Network, Canadian Farmers for Justice and the Prairie Centre. Several of the items appearing here originally appeared in an email list operated by Dwayne Leslie at http://www.prairielinks.com

Manitoba: Anti-wheat board farmer back in court

Dave Bryan, the Saskatchewan farmer fighting the monopoly powers of the Canadian Wheat Board, made another bid January 21 to get a court to take his side in a case that could have implications far beyond the farm gate.

"It goes to the heart of property ownership which is pretty damn important," says Bryan, 37, who farms near Central Butte, Sask.

He wants the Manitoba Court of Appeal to overturn his February 1998 conviction in Winnipeg for violating the Customs Act by hauling grain across the Canada-U.S. border without a licence.

In convicting Bryan, Queen's Bench Justice James Smith ruled last year that the Canadian Wheat Board Act falls within the powers of the federal government to regulate trade and commerce.

But Bryan, who is fighting the wheat board with the support of the National Citizens' Coalition, keeps arguing the wheat board's control of western wheat and barley is an abuse of his and every farmers' rights to control their own property.

That's the issue which has drawn the coalition.

"It goes right to the heart of property rights and the federal government's unresolved jurisdiction," says coalition president Stephen Harper.

Property rights are not guaranteed by the Charter of Rights and Freedoms, although they were guaranteed in the Canadian Bill of Rights which preceded it.

Property rights - and Ottawa's alleged lack of jurisdiction in the area - have also been raised in the provincial challenge of Ottawa's gun registration law.

Bryan feels he has an even stronger case.

"It's going to be a lot harder for a panel of judges to deny a person the right of ownership of his wheat or barley."

He's also more optimistic that a higher court will feel able to make such a significant decision.

"There's a lot of jobs and grain movement will be affected to a great extent," he says. "I think we'll have a lot better chance this time than last time."

They have a little bit of history on their side.

In 1947, farmers fought the wheat board's post-war monopoly in the Manitoba Court of Appeal and won, a decision that was later upheld by the Supreme Court of Canada. Essentially the federal government had wanted to maintain its wartime control of grain to guarantee low prices.

But in 1952 farmers lost in what was then the court of last appeal, the British Privy Council. It said if the Canadian government could expropriate the property of its Japanese citizens during the war, it could also expropriate the property of its farmers.

Harper suggests such a rationale would be unthinkable today.

"The legality of the wheat board in the modern age is untested."

That's not quite accurate.

Besides Smith's ruling, those who argue the monopoly is legal also managed to convince Federal Court Justice Francis Muldoon they were right in 1997 when barley growers raised the same issue.

Meanwhile, about two dozen farmers who, like Bryan, ran the border in 1996 to protest the monopoly are still working their way through Saskatchewan's courts and are set to appear again on March 15.

Three judges of the Manitoba Court of Appeal heard nearly six hours of arguments from Art Stacey, the lawyer representing Mr. Bryan, and Chris Mainella, a federal crown attorney. At the end of the day, they reserved their decision.

Bryan will find out in a few weeks whether he is successful.

Chicken police, prison time, and stand up comedy

By Kevin Avram

"Chicken police!" he guffawed, "You gotta be jokin'!"

"No kiddin, Skeeter. If ya got too many chickens layin' eggs on your place the police will come around and either fine you or seize your chickens," I said.

"And they throw people in jail for sellin' their own wheat?" he asked for the third or fourth time, unbelief dripping from every one of his words.

"Yeah," I replied. "A bushel of wheat or a pound of dope - selling either one will put you in the slammer."

"What the hell kinda country is that?" Skeet wanted to know. "I thought Canada was a free country."

Skeeter, Stan, and I were heading home that night. I had been living in Nebraska for just a few months and was getting acquainted with the locals. Skeeter is a good old boy who grew up in central Nebraska. His family had farmed at one time but for the past few years Skeeter - or "Skeet" as his friends call him - had been selling farm equipment.

The meeting had been an agricultural event. I was one of the speakers. Skeeter had come along with a friend who worked with Americans in Motion, an American non-profit member organization. Because I am a home-grown prairie boy from Saskatchewan, and have worked with agricultural policy issues in the past, I've been called on from time to time to explain how things are done in Canada.

This particular evening, however, rather than accepting what I was saying as being serious, Skeeter and several of his buddies were convinced I was doing stand up comedy.

I've told stories about run ins with the law that farmers have had. The escapades of Andy McMechan, Bill Cairns, and Clay Deroscher will silence a crowd. They're the three Manitoba farmers who did prison time for selling their own grain outside of the CWB monopoly. The story I told of the farm couple in Northern Alberta who got in serious trouble for having too many chickens brought a roar of laughter to more than Skeeter and his entourage. Even the more sober-faced folks in the crowd cracked a smile. After the initial chuckle however, the gravity of the situation became apparent.

I told of the fact that grain trains in Canada move grain at an average speed of about three miles an hour - three weeks to the coast and back. The fact that a secretive government agency bought the hopper cars that move the grain with farmers' money was an especially large pill to swallow.

Some weeks ago I told a senior senator in the state that the movement and allocation of rail cars that move grain in Canada is essentially controlled by the government. This particular senator is probably the most senior legislator in the state with respect to agricultural matters. Unlike Skeeter, he didn't laugh. He just looked at me like I was an idiot. He obviously didn't believe me. It was such a big leap to even accept such an idea that he walked away, convinced that I was some kind of a crackpot.

Another time I told a corn grower that Canadian farmers who export their feed barley are compelled by law to do so through the government. When I mentioned that the initial payment received by the farmer was (at the time) just over US 50 cents he looked at me with a blank stare. Then I explained about the final payment that arrives a year or a year and a half later. His only question was how anyone could sustain an operation with that kind of delay in cash flow.

It's funny how things can appear so different when viewed through someone else's eyes.

Kevin Avram is a former director of the Prairie Centre/Centre for Prairie Agriculture, and continues to sit as a member of the Prairie Centre's Advisory Board. He currently works as Projects Coordinator for the US organization, Americans in Motion, and makes his home in Grand Island, Nebraska.

This One's Not Going Away

By Craig Docksteader

There's really no way around it. One of the most contentious issues in grain transportation that the government of Canada will have to deal with this year concerns the future of legislated freight rates and the railway rate cap.

Even before Justice Willard Estey recommended changes in this area, the ball was rolling. The federal government was already obligated to a review of the Canada Transportation Act (CTA) in 1999 which specifically requires a decision on retaining or removing the statutory rates on grain transportation and the maximum rate cap.

Like changing the Crow Rate, this one's a potential political landmine. It was 1974 when former Transport Minister, Otto Lang, first launched the debate on the Crow Rate, eventually resulting in the 1983 Western Grain Transportation Act (WGTA). The WGTA was later replaced with the CTA in 1996, bringing the transportation subsidy to an end. To this day, there is a significant constituency of prairie farmers who feel that by eliminating the Crow the federal government sold them out to the railways. The statutory method of determining freight rates, along with the rate cap, is now perceived as their only remaining defense against rising transportation costs.

After 102 years of using government to establish the cost of moving grain over rail lines, few would expect that the system is going to change without some degree of pain. But the fact that it must continue to change is becoming increasingly apparent.

Dr. Graham Parsons, who recently published a number of studies on the prairie grain handling and transportation system, writes that "the freight rate structure of the grain handling industry remains a major source of system inefficiency. Maximum statutory freight rates represent a cross subsidy within the grain handling system that creates a misallocation of rail and system resources, a cross subsidy between efficient and inefficient lines, a misallocation in the demand for railway services, and an inefficiency loss and additional costs to farmers."

Parsons explains that because the maximum rail rate levels don't always reflect the actual costs of operation, there are several undesirable effects:

  • Revenues for rail movements on expensive lines cannot meet costs of operation.
  • Profits on efficient lines must be reduced to pay for inefficient lines.
  • Demand for rail lines where maximum rates are below operating cost increase.
  • Resources are diverted to the least efficient part of the system.
  • There is inadequate investment in either inefficient or efficient lines.
  • Long term system productivity is reduced

In other words, while statutory rail rates and the rate cap may appear to protect farmers from higher freight bills, they actually make the whole system more expensive and less productive than it could be. As painful as the idea may sound to some, it will be impossible to capture the full potential for constructive reform in grain transportation without moving away from the current statutory freight rate system.

This is not news to the federal government. Industry players, producer organizations and academics have been telling them that for years. The problem has been that, like removing the Crow, there has not been the necessary support for the change at the grassroots level. Too many producers don't recognize that the regulated system is hurting their industry instead of helping it.

But while there may be little consensus on the issue, there is also little option to ignore it. The existing freight rate system presents a significant barrier to increasing the international competitiveness of the prairie grain handling and transportation system. Although some producers wish it would, this issue is not going to go away.

A Canada-U.S. Comparison

By Craig Docksteader

Just a few weeks after Justice Willard Estey submitted his final report on the grain handling and transportation system, another intriguing report hit the streets. Entitled "Grain Handling and Transportation Systems: A Canada-United States Comparison", the study was carried out jointly by a Regina-based economist, Dr. Graham Parsons, and Dr. William Wilson, a professor at North
Dakota State University.

Their findings were significant.

  • Waiting times for vessels at the ports in Vancouver are three times as great as those in the United States.
  • Country elevation charges in Canada are twice as high as those in the States, ringing in at $10.35 per tonne in Saskatchewan and $5.25 per tonne in North Dakota (all figures in Canadian dollars per tonne).
  • The spread in terminal elevation was found to be even greater, at $7.69 in Canada and $1.84 in the U.S, a difference of 318 percent.
  • Cleaning charges were also higher in Canada, at $3.40 compared to $2.29 south of the line.
  • 40 percent of spring wheat shipments in the U.S. are shipped in unit train movements which contrasts with less than 25 percent of shipments from Canadian Prairie elevators.
  • After adjusting for the U.S. Export Enhancement Program, U.S. farmers ended up receiving up to $36.28 per tonne more for their wheat and $45.31 per tonne more for their barley in 1995/96.
  • When all the numbers were added up, the Canadian system cost prairie farmers $505 million more than farmers in North Dakota, and $415 million more than farmers in Montana.

According to the authors of the report, the primary reason for the differences in the cost of the two systems is evident: "In western Canada the closely controlled administered market offers higher costs and lower economic returns to farmers... In the U.S., competitive regulation since the 1980's has delivered large efficiency gains throughout the grain handling and transportation system that have been reflected in higher country prices for wheat and barley in North Dakota and Montana compared to Saskatchewan."

In other words, the U.S. system is more efficient than the Canadian one, to the tune of a half billion dollars a year.

While we might hate to admit it, we can learn something from our American neighbours. When the U.S. government began to deregulate and introduce competition into their grain handling and transportation system, the results were positive. The report states that, "This competition has led to a large number of efficiency incentives to improve service and realize operating savings."

Instead of driving up costs, as many Canadian farmers fear would happen, deregulation in the U.S. led to greater efficiencies and lower costs. For example, when rail rates were first deregulated in the early '80s, rates fell quickly from between 2 percent to 19 percent, depending on the type of grain. By 1995, rates had dropped between 45 percent to 55 percent relative to what rates would have been without deregulation.

To top it off, the Americans found that in a deregulated environment, efficiencies in one part of the system had a domino effect, sparking efficiencies throughout the system. What regulation could not accomplish, competition did.

The significance of these findings is underscored in Justice Estey's final report to the Minister of Transport. "Canada alone must face the grim reality that remaining competitive in the world grain market depends almost entirely upon reducing and holding to a minimum the cost of transporting grain to tidewater or to rail export point."

In other words, either we allow our system to become efficient by introducing competition, or we slowly but surely lose our edge in foreign grain markets.

It's Time To Move On

By Craig Docksteader

Let's be frank. The first one hundred years of Canada's prairie grain handling, marketing and transportation industry have been dominated by ideas rooted in socialism. That's not a secret, it's a well-known fact.

Perceived problems in the industry in the early part of the 20th century were tackled by implementing solutions based on popular socialist theories of the day: Trading of wheat on the open market was abolished in favour of a state-controlled wheat-buying monopoly; revenues from wheat sales were averaged between all producers so no one farmer would earn more for his bushel of wheat than the next; transportation costs were pooled by charging farmers a rate which averaged the cost of expensive lines with the more economical ones; laws, regulations, and bureaucrats gradually displaced all lingering evidence of a market-based, profit-driven, efficiency-dependent system.

On the surface, the cause appeared noble -- put everyone on a level playing field by removing the advantages of some in order to compensate for the disadvantages of others. Greed would be eradicated, along with the problem of jealousy over a neighbour's good fortunes, by eliminating the opportunity for individual initiative and dealing with everything in averages. Once the crop was in the bin, individual risk would be eliminated along with individual rewards. Farmers could now get on with the job of being producers and together we would prosper on the prairies.

The problem is, it didn't work.

In fact, no other single public policy initiative has done more harm to the economic well-being of the prairies than the move to socialize the prairie grain industry. Instead of promoting value-added industries, the system skewed the incentives toward exporting raw product. Instead of creating and environment where the entrepreneurial spirit could flourish, innovative ideas had to run a gauntlet of bureaucracy, regulation and legislation. Instead of encouraging efficiency, the system developed into an unaccountable, uncompetitive, overcomplicated, quagmire. Instead of facilitating the creation of wealth for prairie farmers and the prairie region, the system sopped up farmers' profits and funneled them off to grain corporations, labour unions, transportation
companies and bureaucrats.

It was a nice idea, but like most of the world has discovered, the socialist ideas of the early 20th century do not work in the real world. In the real world you cannot create accountability through regulation. In the real world people won't take risks without possible rewards. In the real world, efficiency isn't necessary unless there's competition. In the real world, profit isn't a
dirty word. In the real world, wanting to harvest more than you seed is good business sense, not greed. In the real world, more and more public policy is being defined by practical economics rather than blind allegiance to a political ideology.

There is no question that the prairie grain industry sits at a crossroads. Will the future of prairie agriculture be defined by the political ideas of yesterday, or the economic realities of today? Will we continue our romance with a fundamentally flawed system, or embrace the opportunities of tomorrow?

The recently-released report by Justice Willard Estey on the Grain Handling and Transportation Review recommends the latter. Nailing issue after issue with blunt realism and recommendations that will rock the status quo, the report summed up the industry's predicament clearly, when it asked the following question:

"Should our agricultural products be taken to market through a state agency... or should we meet the challenges of international competition by the more conventional methods of commerce...? If economics and not politics is the ultimate plane of settlement of human adversities, then the issues and proposals in this Report... cry out for consideration in the wider Canadian community today."

After a twelve month review of the system, Justice Estey's refreshing recommendations echo the obvious -- it's time for prairie agriculture to move on.

Finishing the Job

By Craig Docksteader

It will be interesting to see what role former Canadian Wheat Board Chief Commissioner, Lorne Hehn, takes on now that he is no longer a commissioner. When the new CWB board took office on January 1, all the former commissioners, including Hehn, were effectively out of a job.

Well, maybe.

Hehn has made it clear he's prepared to enter into a consulting arrangement with the new board of directors and almost appears to be politicking to find himself a role. Even before the election took place, word on the street had it that CWB management was quite concerned about the transition to a new board. It wasn't clear where the rumblings came from, but some observers speculated it would have had to come from the top down.

Then, immediately after the new directors were announced, Lorne Hehn dropped the loaded suggestion that the CWB's customers are very concerned about all the new faces at the CWB. "Any time you're in the Asian or Latin American cultures in particular, if the faces are all going to be new it would be quite upsetting," Hehn told the Western Producer. Terry Hanson, the elected director for district eight, picked up the cue, commenting, "I really feel it's important that we have a place in this transition for our commissioners.

They've got so much expertise and they've got so many contacts around the world that we have to keep using them as linkage to those customers."

But while it may sound nice, there are at least three reasons why Lorne Hehn should have nothing to do with the new CWB.

1. The obvious one is that the new board and CEO need to be able to do their jobs without having the former boss looking over their shoulder. It's corporate protocol 101. Nothing complicated, nothing personal, just get out of the way so the new board can get down to business without the awkward situation of having the last regime hanging around. Imagine wanting to make a decision that was contrary to what Lorne Hehn thought should happen and needing to sell the decision to top CWB management with Hehn still prowling the halls.

2. The other reason why Lorne Hehn should have nothing to do with running the new CWB is also quite simple - he doesn't need to. That stuff about customers crying in their beer 'cause there are new faces around is mostly nonsense. True, trust is important in trade relationships but ask someone in international trade who's not trying to protect their turf and you'll get a little different vantage point. Most customers don't really care about whose pretty face they get to negotiate with so long as their egos are stroked by having it be the top guy. It might come as a blow to Mr. Hehn that customers Asia may not be nearly so interested in meeting with him now that Greg Arason is the president.

3. But here's the real clincher. Effective January 1, 1999, Lorne Hehn became eligible for a CWB severance package worth over a quarter of a million dollars. The justification for putting the package in place was to prevent Hehn from getting a job in the grain industry for at least two years. That's because, as a commissioner, he was privy to a lot of commercially sensitive information which could be extremely valuable. It doesn't make much sense to pay a guy a quarter of a million dollars to get him out of the picture for two years and then keep him around anyhow.

It's now up to the board of directors to determine the parameters of Lorne Hehn's new relationship with the CWB. If they do it right, there won't be one.

Craig Docksteader is Coordinator with the Prairie Centre/Centre for Prairie Agriculture, Inc. "Where Do We Go From Here" is a feature service of the Prairie Centre

Prairie Centre/Centre for Prairie Agriculture, Inc.
#205, 1055 Park Street, Regina, SK S4N 5H4
Phone: 306-352-3828
Fax: 306-352-5833
Email: prairie.centre@sk.sympatico.ca


The CFEN needs your help! The battle against the Canada Wheat Board can only continue with your support.

Canadian Farm Enterprise Network
Box 521
Central Butte, Saskatchewan
S0H 0T0
CANADA

Write the following and demand free market rights for Western Canadian farmers!

The Canadian Wheat Board
423 Main Street
P.O. Box 816, Stn. M.
Winnipeg, MB
Canada
R3C 2P5

Telephone: (204) 983-0239 / 1-800-ASK-4-CWB
Fax: (204) 983-3841

Email Address: cwb@cwb.ca

Ralph Goodale
Minister Responsible for the Canada Wheat Board
Department of Natural Resources Canada
21 - 580 Booth Street
Ottawa, ON
Canada
K1A 0E4

Telephone: (613)996-2007
Fax Number: (613)996-4516
Email Address: rgoodale@NRCan.gc.ca

 




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