Transforming the Canadian Wheat Board

Although the Canadian Wheat Board has implemented a number of reforms in recent years, Dr. Hartley Furtan with the Department of Agricultural Economics at the University of Saskatchewan in Saskatoon believes more fundamental changes are on the horizon.

"Changes to the pool account guarantee and the single-desk (SD) selling authority are inevitable," says Furtan. "We need to encourage dialogue among farmers, government and other interested parties on the policy alternatives for such changes."

In Furtan’s view, the objective of the dialogue should be to identify reforms that will better serve the interests of western Canadian wheat and barley farmers and better position the CWB to compete in global markets in the 21^st century.

Much has changed on the Prairies since the CWB was first established. On the farm, wheat as a crop has declined in economic importance. According to Furtan, wheat as a percentage of total farm revenue has declined from 78 per cent in 1950 to just under 40 per cent in 2002. Meanwhile, the economic importance to farmers of livestock and commodities marketed outside the CWB, such as canola, feed barley and pulse crops, has grown over the last 30 years.

Off the farm, the Prairie economy has grown and diversified in the last 50 years in many areas, most notably oil and gas, mining, manufacturing and services. "These developments have stripped the CWB of any significant role as a tool of development policy in Western Canada," says Furtan. "Perhaps that was a role when the CWB was first conceived, but not anymore. Its only role for some time now has been to earn premiums in the market for Prairie farmers."

Much has also changed in global trading markets since the CWB was first established. The "green revolution" and the introduction of high-yield varieties have resulted in sharply increased wheat production in many countries, pushing down prices.

While Canada promotes free trade in most agricultural commodities, it makes exceptions in export markets for wheat and barley sold through the CWB and in the domestic market for supply-managed commodities like poultry, eggs and dairy products. In Furtan’s view, this policy position limits Canada’s influence on trade matters.

"The CWB as a state trading enterprise has been under pressure from some members of the World Trade Organization (WTO) to change some of its operational procedures, including the role of government financing of the CWB pool account guarantee and the single-desk selling authority," notes Furtan.

"While these CWB procedures have been periodic irritants to some of our trading partners, principally the United States, the more compelling impetus for CWB reform should, and ultimately will, come from Prairie farmers and policy-makers," he says. "The question for Prairie farmers then becomes what kind of reform will best serve their interests?"

Dr. Furtan offers three suggestions for reform.

Self-insure the pool account

Currently, the federal government guarantees any shortfall in the pool account. This support has been a trade irritant to trading partners for some time, even though shortfalls have been incurred in only four crop years since 1950.

"An alternative to the government guarantee might be to move to a support similar to the loan rate set in the U.S. Farm Bill," notes Furtan. If the price of the commodity falls below the loan rate, the U.S. government makes a deficiency payment to farmers. In Furtan’s view, the effect of adopting such an approach would not be substantially different from the existing guaranteed pool account.

Furtan, however, prefers a farmer-funded guarantee, supported either by insurance, which he suggests would not be expensive given the infrequent occurrence of a pool account deficit, or by self-insurance through a grain check-off by which an account could be built up to cover any deficit.

Drop domestic single-desk

Furtan recommends that the CWB give up its single-desk selling powers in the domestic market in exchange for the ability to market all types of grains produced on the Prairies, including canola and pulse crops. The Australian Wheat Board has already made this move (see "Open marketing – It works in Australia").

Furtan’s suggestion falls short of eliminating the single-desk authority altogether in all markets and for all commodities. Complete elimination would make Canada a free trader in all grains but would also close the chapter on a farmer-controlled marketing agency that could price discriminate in world grain markets.

CWB transformation

Furtan believes the CWB must be transformed from a marketing board into a Canadian grain enterprise. "If we enabled the CWB to purchase grain-handling assets and gave it appropriate transition supports," says Furtan, "the CWB and its personnel, with their experience in global grain markets, are well positioned to compete very successfully in world grain markets, as they have been doing for the past 60 years."

In Furtan’s view, the policy choice is whether to continue to defend marketing board procedures created for an earlier era in global trading or, given changes in global markets, to endeavour to build a Canadian marketing enterprise that is better equipped to compete in those markets.

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