Thursday, October 12, 2006

Down Boy

Chuck Strahl has been all over the Canadian Wheat Board like a dog on a bone. During the last election, the Conservatives made an ill advised promise to get rid of the Wheat Board.

The Canadian Wheat Board is a democratic organization that represents all wheat producers and markets all wheat produced in the Western Provinces. These monopoly selling powers allow the board the ability to have leverage in setting prices rather than being simple price takers in a commodity market. A market report from an independent market research firm made this observation yesterday:

Wow! The world buyers and sellers of wheat are finally coming to the realization that supplies are running seriously low. This could mean the world agricultural markets are finally making the great transition from cheap to dear that the energy and metals markets did.

After previous reports saying the Aussie crop could sink to 10 million tonnes, new reports are now indicating Ukraine might suspend or limit its exports. With European supplies down and wheat prices rising fast there, buyers are wondering where to go for wheat. The U.S. does not have a lot. Canada does but a lot of wheat in the west is in the strong hands of a Central-Desk seller known as the Canadian Wheat Board!


The market power the wheat board holds was also recently recognized by provincial ministers of Agriculture:
“The removal of the single desk would result in a serious financial loss for western Canadian grain producers and would have far-reaching negative effects on
short-line railways, independent inland grain terminals, the Port of Churchill and trade with the U.S.,” Manitoba Agriculture, Food and Rural Initiatives Minister Rosann Wowchuk said.
Like every monopoly, the Wheat board should be held accountable. The wheat board recognizes this saying:

As an organization, we are fully aware of the extensive debate surrounding the future of the CWB. We believe that it is critical that farmers have the benefit of a free and open debate. Any restrictions which stifle this debate will not do it justice.

Our position has always been that farmers, through the plebiscite called for under the CWB Act, must vote on any changes to the mandate of the organization. The CWB works on behalf of the farmers of Western Canada, and it is the farmers of Western Canada who should decide its future.

Instead of allowing a free debate among producers the Government placed a gag order on the wheat board and issued a press release that made Minister Strahl sound eerily undemocratic and borderline arrogant:
"The CWB reports to Parliament through me, and should not be attempting to
undermine this government’s policy objectives."
Whoa! I thought this government was about grassroots democracy, statements like this one undermine that message. Minister Strahl should let this one go and let Prairie farmers decide the best way to operate their wheat board. Down Boy.

2 comments:

Spence said...

my friend,
You have many good views on this sight, but you need to learn a little about the Canadian Wheat Board. My advice would be to talk to the type of farmers that win awards for their work. The Wheat Board has never been about democracy... But it became rather about Bureaucracy and the enemy of the Canadian farmer. It discriminated against the western farmer while the eastern were free to sell as they wish.

Patrick O'Neil said...

Spence,

I would really like to hear your thoughts. I'm not from the west so I only get bits and pieces. I know that until recently Ontario had its own Wheat Board that operated a single desk.

I do know that basic economics means a monopoly whether buying or selling generates market power, which should benefit the party with the monopoly.

I also know that monopolies are by their nature unstable, with an everpresent incentive to 'cheat' and ship outside the monopoly.

As I understand the Wheat Board's position, it's that farmers should decide what the marketing structure is. This makes sense to me, because it would be tragic if a vocal minority would over ride the views of the majority.

However, like I said I'm from Ontario, and I'd be happy to hear a more detailed rebuttal.