Canada: Government presents legislation to end Canadian Wheat Board monopoly
The Canadian government put forward long-promised legislation on October, 18 to dismantle Western Canada's grain-marketing monopoly, and gave the Canadian Wheat Board (CWB) five years to implement a business plan to survive in an open market, Reuters reported on October, 18.
In draft legislation presented to Parliament, the Conservative government offered the CWB certain financial guarantees, but said it would not provide seed capital or regulated access to grain handlers after the board loses its grain marketing monopoly.
It also said it would remove the 10 farmer-elected directors on the board, leaving government appointees in charge, after the legislation is approved.
The monopoly's removal would allow western farmers to sell directly to grain handlers, instead of marketing those crops only through the Wheat Board.
"The sky will not fall in an open market," Agriculture Minister Gerry Ritz said at a press conference on an Ottawa-area farm. "Instead, the sky will be the limit."
Once the legislation receives final approval, likely by late 2011 or early 2012, farmers and grain companies will be able to sign forward-pricing contracts for Western Canadian grains, effective Aug. 1, 2012, the start of the 2012-13 crop marketing year, Ritz said.
The CWB would have to draft a sustainable business plan during the first four years of the open market, which it would implement in the fifth year.
If it comes up with no plan acceptable to the federal government, the board could be shut down, said a federal agriculture official.
The draft legislation said Ottawa would continue to guarantee Wheat Board borrowing and the board's initial payments to farmers for up to five years and help with downsizing costs.
The assistance falls well short of requests by the CWB as it moves to compete in an open market system.
The Wheat Board, which had revenues of C$5.8 bln ($5.7 bln) in 2010-11, has no retained earnings or grain-handling facilities of its own and had asked for both seed capital and regulated access to grain facilities owned by other companies.
Viterra Inc, Richardson International Ltd and Cargill Inc own the largest networks of grain-handling elevators and port terminals in Western Canada.
Ritz said Ottawa will monitor anti-competitive behavior by companies that own Western Canada's grain-handling facilities.
In the short term, the CWB may command farmer loyalty to buy enough grain to form a partnership with a major grain handler, but it's uncertain how long that will last, said Derek Brewin, an associate professor of agricultural economics at the University of Manitoba.
"In the long run, I think that lack of (regulated) access is a problem," he said, adding that other smaller grain handlers could also lose access to facilities once the CWB loses clout.
By not providing money and regulated access, the government appears to be leaving the board's survival up to the farmers who still support it, said grain industry analyst Ron Frost.
"It gives the optics of saying, 'We will give you a little bit of help but you're going to have to have the initiative to find people who are willing to support you'," Frost said.
Ritz did not rule out allowing an outright sale of the Wheat Board, which has highly regarded contacts with importers in other countries.
Canada is the world's biggest exporter of spring wheat, durum and malting barley, mostly through the Wheat Board.
The CWB's elected chairman, Allen Oberg, vowed on October, 17 to fight the government's bid to end the monopoly. But once the House of Commons passes the new legislation, Ottawa will remove all 10 farmer-elected directors, including Oberg, leaving in place Chief Executive Ian White and four other federal appointees.
"That is typical of this government's anti-democratic behavior," said Terry Boehm, president of the National Farmers Union. "(Farmers) have elected directors and this government is going to get rid of them."
Boehm doesn't expect the Wheat Board to survive in an open market, but others said farmers will thrive.
"I'm going to see more companies want to buy my grain," said Stephen Vandervalk, president of the Grain Growers of Canada. "The more competition the better."
The Conservatives hold a majority of seats in the House of Commons and don't need support from opposition parties to pass legislation. Nonetheless, opposition politicians have promised to try to slow down the legislation.
"What they're doing today is ... illegal," said Wayne Easter, a Liberal Party legislator.
The Wheat Board's Oberg said this week that the board would consider legal action against Ottawa, because the law currently requires farmers to decide any change in the CWB's mandate.
In a nonbinding Wheat Board vote held this past summer, 62 percent of farmers who responded voted to keep the CWB's marketing monopoly for wheat and 51 percent favored keeping the current system for barley.
For grain handlers, the legislation is a relief because it doesn't give Wheat Board an unfair advantage, said Wade Sobkowich, executive director of the Western Grain Elevators Association.
Grain handlers are also pleased, he said, that Ottawa is offering C$5 mln worth of incentives during each of the next five years to keep grain flowing through the northern Manitoba port of Churchill.
19 October, 2011
