March 11, 2007

 

Say good-bye to the CWB...

From: The Wall Street Journal

Canada's Grain Growers Chafe
Wheat Board Tensions Stir Up Issues of Money And Self-Determination
By: DOUGLAS BELKIN
March 8, 2007; Page A8

Canada's barley farmers, long insulated from the vagaries of global trade by the government-backed Canadian Wheat Board, will vote next week on whether to break free.

Some farmers view the 72-year-old board, which buys and sells their product on the world market, as inefficient. If the barley farmers are allowed to bolt, wheat farmers could follow, marking the biggest change in Canada's huge grain business in three generations.

Farmers like Doug McBain, who has harvested barley on 1,500 acres of high country prairie all his life, are among those agitating to leave. As global grain prices have climbed in recent years, the debate has grown more contentious. "Where you stand has almost become like a religion," says Mr. McBain, 49 years old. "What I say is, if you can't compete on your own, get out of the market, but don't try and tell me what to do."

Last year Mr. McBain was offered $4.25 a bushel from a Chinese distributor for his malt barley. He was legally prohibited from selling it himself, and instead was required to accept $3.25 from the Wheat Board, which hadn't sold at the top of the market. He says he has friends who would like to grow organic barley but, because they couldn't sell it for the premium it could command, they have little incentive to try.

In recent weeks, long-simmering tensions between backers and opponents of the 15-member board have reached a boil. Some 80,000 barley farmers have until March 13 to cast their advisory vote on one of three options: ditch the board and sell their grain themselves, preserve the status quo, or remain under the board with the provision that they can opt out. Polls show less than one-third of farmers want to leave things as they stand.

Barley represents about 10% of the wheat board's business, but the vote is seen as a bellwether for the nation's massive wheat market.

At the heart of the fight are issues of land rights, self-determination and money. Ultimately at stake is the system through which 55% of the world's durum wheat and 25% of its malting barley will be sold. U.S. grain companies are watching the struggle because they stand to benefit from a more accessible market.

In 1935, Canada created the wheat board to insure loans to farmer's cooperatives during the Great Depression. About 90% of the country's wheat and barley for domestic human consumption and export is sold through the board. The majority of that harvest is pooled and farmers receive an averaged price.

For the farmer, that means the lows in the market are generally avoided - but so are the highs, and whether that has meant an overall benefit to the farmer has become a contested issue.

In the mid-1990s farmers began to challenge what they came to see as over-regulation. Some protested the board by illegally trucking their harvest to the U.S. and selling for better prices. Dozens ended up in jail. For farmers who want out of the wheat board, which now sells about $4 billion of grain a year, those protesters are seen as freedom fighters. To others, they are traitors.

"If you make a decision on your farm that only affects you, you get to make it," says Kyle Korneychuk, a wheat board director and Saskatchewan farmer who favors maintaining the board's monopoly. "But if you're going to do something that affects all the farmers in Canada ... you're going to get pushed back."

The board today is more crucial than ever, says Mr. Korneychuk, as a half-dozen multinational agricultural companies like Archer Daniels Midland Inc. and Cargill Inc. control the lion's share of the global grain market.

"We're aware [of the controversy] but we're not lying awake dreaming about it or scheming around it," Cargill spokesman Robert Meijer said. "Once they make a decision we will work with them, whether that be with the board or without the board."

Last year, Canada's Conservative Prime Minister Stephen Harper replaced four of the five government-appointed members of the board. In their place he selected directors who want to break the board's monopoly.

"The ultimate aim is to have a strong, viable, yet voluntary wheat board," said Conrad Bellehumeur, spokesman for Agriculture Minister Chuck Strahl. "We want to remove the wheat-board monopoly and offer farmers the freedom to choose how they market their product."

Mr. Korneychuk says that if the board became optional, it would lose effectiveness and limp along until it disappears in a few years.

To that, Mr. McBain says good riddance. His broad stretch of prairie at the feet of the Rocky Mountains has been painstakingly cultivated by his family since his grandfather immigrated from Scotland 100 years ago. Every slab of timber in the pair of red barns and each furrow in the soil was set in place by a McBain. Today, the farmer has little patience for anyone telling him what to do or how to do it.

Mr. McBain also says board regulation has stymied local investment. He argues that were it not for the board, hundreds of millions of dollars would have been invested in Canada instead of migrating to the U.S.

Mr. Korneychuk says tens of thousands of farmers have already left their land because they couldn't compete with subsidized U.S. farmers or the cheap labor available in Eastern Europe. As fixed costs for farmers continue to rise and competition tightens, he predicts it will only get worse. In the meantime, the board has reformed itself and now offers farmers a broader array of options to sell their crop than they had a decade ago.

After the March 13 vote, the debate over whether barley farmers remain under the wheat board will be taken up by the federal government, which appears headed toward an election this spring. Should the Conservatives gain a majority in Parliament, Mr. Bellehumeur, the agriculture ministry spokesman, said the board will be opened up. The battle over wheat is likely to follow. "The ultimate goal is to remove the monopoly," he said.

Mr. McBain said he is ready. "I don't need a baby sitter."

Copyright 2007 - The Wall Street Journal

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