(CBC)

The Canadian Wheat Board has a monopoly on the marketing of wheat and barley in Western Canada and is facing questions, both from within Canada and from abroad, about its relevance in an era of global trade.

The Canadian government created the wheat board in 1935 in response to plummeting grain prices during the Depression that threatened to destroy the industry.

The CWB followed in the footsteps of previous attempts to temporarily stabilize the grain market in Canada in times of crisis.

The Board of Grain Supervisors was appointed in 1917 to market grain during the First World War. Another board was created to deal with a post-war crash in grain prices, but the government, determined to let market forces determine the price of grain, disbanded it after a year.

In the 1920s, western farmers formed their own grain marketing co-operatives, first in Alberta and then in Manitoba and Saskatchewan.

The three wheat pools got together in 1924 and formed a central selling agency, the Canadian Co-operative Wheat Producers, but the fall in grain prices following the Depression nearly wiped out the pool system altogether.

The Canadian government stepped in with financial aid to save the pools and eventually replaced the selling co-operative with the CWB.

The board was originally a voluntary agency, given the mandate to market Canadian grain at a fair and stable price for all its members.

But since 1943, Canadian wheat farmers have been compelled by law to sell their crops only to the board.

Barley and oat farmers also came under the board's control in 1949. Oats were removed from the CWB's jurisdiction in 1989. The CWB now has control of all wheat and barley grown in the West that is destined either for human consumption in Canada or for export.

The board is based in Winnipeg and doesn't handle the grain itself, or own any rail cars or elevators. The CWB's 365 employees negotiate deals to sell the grain at a single fixed price it determines.

The law governing the CWB was changed in 1998, so that the board is no longer a Crown corporation. Instead of being run by a handful of government appointees, the board now has 15 directors, 10 of whom are elected by Western farmers and five of whom, including the president, are appointed by the government.

However, the federal government still guarantees to cover any losses the Wheat Board suffers. Since 1943, Ottawa has spent $1.3 billion covering the board's deficits. Most of that money was spent in 1991, when the board lost $673.4 million after a U.S. export program drove down wheat prices. In 2003, the CWB reported an $85.4-million loss, mainly caused by a surging Canadian dollar, the board said.

Monopoly, open market or mixed?

Some farmers say the board has outlived its usefulness, that selling grain through one government agency - the "single desk," they call it - no longer works.

Defenders of the CWB say that without it the price of grain would fluctuate day-to-day and farmers themselves would have to negotiate their own price.

Opponents of the board say that's exactly what they want. These farmers say that, with the internet, they can monitor the price of their crops as they change, and negotiate accordingly. These farmers say they could sometimes get a higher price than the one negotiated by the CWB.

Somewhere in the middle are farmers who believe that pooling wheat and negotiating a common price might be a good idea for some farmers, but that they shouldn't be forced by law to sell their grain only to the CWB. These farmers support a dual market system in which farmers could sell their crops either to the board or on the open market.

In 1997, a referendum of barley producers found that nearly 63 per cent of the farmers support retaining the CWB's monopoly. Critics of the referendum, however, pointed out that the dual market system wasn't an option on the referendum.

In a plebiscite of Alberta farmers in 1996, 66 per cent were in favour of the dual market system.

The board also survived a court challenge in 1997. A group of Alberta farmers argued that the Canadian Wheat Board Act infringed on their freedom of association and the right to earn a living. A federal judge ruled that the monopoly was legal and a reasonable infringement on the farmers' freedoms.

Pressures from abroad

The CWB has also faced pressure from south of the border. The U.S. market represents about 10 per cent of the Canadian Wheat Board's sales, or about $400 million a year.

In 1993, Canada exported 2.8 million tonnes of wheat to the U.S. The record flood of Canadian wheat into the U.S. market had American farmers and senators from farm belt states crying foul.

Canada agreed to a temporary cap of 1.5 million tonnes on wheat exports for one year, from September 1994 to September 1995. After the cap expired, Canada again faced pressure to curb wheat exports to the U.S. The Canadian government resisted.

U.S. agriculture officials argued that the practices of the CWB constitute unfair trading practices and give Canadian farmers an advantage. Canadian officials responded that the CWB passed an initial audit in 1993 and a dispute settlement panel of the North American Free Trade Agreement.

The Bush administration issued a report in February 2003 that claimed the board enjoys advantages such as low-interest loans and use of government-owned rail cars, and that its monopoly status protects it against market risks. Canadian grain trade organizations replied that the WTO allows for bodies such as the CWB, as long as they comply with commercial business practices.

In February 2004, the World Trade Organization cleared the CWB of American accusations of unfair trade practices. The CWB called it a victory for western farmers. The WTO ruling was the 10th time in 14 years that trade rulings have backed the CWB.

In August 2004, however, the WTO approved a plan to cut subsidies and to require state bodies to stop practices that distort trade. Trade Minister Jim Peterson said the ruling could jeopardize the CWB, as well as government supply management of egg, dairy and other producers.

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