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Why the Wheat Board monopoly is being removed

By Milton Boyd
web posted November 21, 2011

The Canadian Wheat Board's (CWB) recent $1.4-million ads showing a 12-ton steamroller rolling over a farmer's field hope to stop the Conservatives' Bill C-18 from eliminating the CWB monopoly. But this is unlikely to happen. The Conservatives have a majority in Parliament, and they swept the rural vote in Western Canada while promising to remove the Board monopoly by August 2012.

In addition, "marketing choice farmers" (those wanting CWB monopoly removed) believe they have many convincing arguments.  Their first argument is that a monopoly violates their basic freedom of choice, a right that improves their quality of life regardless of any monetary gains.

Further, they hold that the Board monopoly has often gotten the farmer lower prices and has missed important market opportunities. They cite that the Board's share of the world wheat export market is now only about 15%, too small to have monopoly power and get farmers higher prices. "Marketing choice" farmers also argue that they make up most of the large commercial full-time grain farmers, and produce over half the wheat, so their wish to end the monopoly should be respected.

Many value the freedom to make their own grain marketing decisions, and think they can do better than the Board monopoly.  They point out that over 70 years ago when the Board was formed farmers had limited grain market information, no television, less than half had telephones, and many were isolated without modern roads and timely communications. But farmers today are much fewer, and many have 3000 acres rather than 300 acres as in the 1930s. They have large trucks and are no longer driving a horse and wagon of grain to an elevator where they could be held captive to price. Many of today's farmers are very sophisticated, well educated, highly competent, internet savvy, and entrepreneurial.

"Marketing choice" farmers hope for Canada to enter the worldwide economic reforms that over the past 20 years have eliminated grain monopoly boards in the former Soviet Union, Eastern Europe, China, and Australia. They mention that many World Trade Organization (WTO) countries, including the U.S., are pressuring Canada to eliminate the Wheat Board monopoly. They argue that just as they buy their fertilizer, chemicals, and tractors, they should be able to sell their wheat as they wish.

"Marketing choice" farmers point out that wheat milling technology has also changed, reducing the need for some of the high protein wheat such as hard red spring that the Board has historically focused on selling. Mills around the world today need less of such wheat to produce flour, which is partly reflected in the falling Canadian market share for wheat sales from about 23% in 1995 to about 15% by 2010.

"Marketing choice" farmers argue that lagging marketing performance by the Board has driven farmers to plant less wheat, lowering Canada's share of world wheat sales.

"Marketing choice" farmers argue against constraints such as permit books and contracts to sell their wheat, and receiving only an initial payment, making them wait over a year for remaining payments. They claim being asked at times to deliver wheat at inconvenient times such as during spring planting.

"Marketing choice" farmers argue that if the canola industry over the past 40 years can prosper and see its production value exceed that of wheat in recent years without a Board monopoly, so can the wheat industry.

They further argue that freedom from monopoly would increase value added and innovation for wheat. Industries such as specialty flour mills and specialty pasta plants could buy directly from the farmer whenever they wished instead of through the CWB, thereby gaining efficiency. Grain processing industries would be more willing to locate in Canada and provide jobs here, instead of in the U.S.  As well, "marketing choice farmers" mention that the freedom to grow new grain varieties, which are higher yielding and lower in protein, could bring more revenue to wheat producers.  

As Western Canadian farmers have become larger, more educated, and more sophisticated, they placed greater value on autonomy and freedom of choice, as evidenced by the Conservative sweep of the rural Western vote. Changing economics, demographics, technology, and values have left many farmers desiring "marketing choice" instead of monopoly. ESR

Milton Boyd is a Professor and Economist at the University of Manitoba. This article is based on his paper, Removal of the Canadian Wheat Board Monopoly: Future Changes for Farmers and the Grain Industry, published by the Frontier Centre for Public Policy.

 

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