ANALYSIS: 'Oppressive' no more: Harper's 'reorganized' Wheat Board

While the Conservatives' bill to overhaul the Canadian Wheat Board will weaken its grip, their long-term goal for the agency — like their strategy for defeating the Liberal Party — may be to eliminate it as a viable alternative.

Legislation to overhaul the agency hits the Commons this week

Prime Minister Stephen Harper was in Regina on Oct. 7 to promote Alliance Grain Traders Inc.'s plan to build a $50-million multi-purpose wheat and pulse milling facility. The government believes ending the Canadian Wheat Board's exclusive right to buy all Western Canadian wheat contributes to investments like this. (Roy Antal/CP)

Stephen Harper doesn’t mince words when it comes to his dislike for the Canadian Wheat Board.

In a review of Don Baron's Jailhouse Justice, a 2001 book about some Western farmers' long and bitter fight to market their own grain, Harper said the Wheat Board was an "oppressive monopoly" and called its "legal bullying" of farmers "one of Canada's best-kept and most shameful secrets."

Ten years later, Prime Minister Harper is finally in a position to do something about it. His government is introducing legislation to dismantle the Wheat Board's single-desk marketing system in time for selling next year’s harvest.

What is a 'single desk'?

Although the Canadian Wheat Board is often referred to as having a monopoly on wheat and barley in Western Canada, technically it is a "monopsony": a market in which goods are offered by many sellers (farmers) but there is only one buyer. 

All sales go through the board's "single desk." The board finds markets around the world, pools the prices it gets, and distributes that price equally among producers, based on the volume and quality of the grain sold.

The writing's been on the wall for the Wheat Board ever since Harper won his majority government on May 2. But while the prime minister vowed that night to listen and to use the lessons his government had learned in minority government, moderating his plans to overhaul the wheat board wasn't what he had in mind.

"This train is barrelling down a Prairie track," he warned opponents of the Conservatives' plans earlier this month. "You’re much better to get on it than to lie on the tracks, because this is going ahead."

The Conservatives promised Western Canadian grain farmers the "freedom to choose" in their 2011 election platform. (And the platform before that. And the platform before that, too.)

In the months since, their actions suggest that much like their long-term strategy for defeating the Liberal Party, the Tories' ultimate goal may be not just to weaken the Wheat Board’s grip, but kill it entirely.

The Conservatives' "dual marketing" vision is a sort of "have your cake and eat it too" proposal, offering farmers a choice of whether to sell to a reorganized voluntary wheat board, or find their own buyer(s) on the open market.

The Wheat Board dismisses dual marketing as a "myth."

"A dual market at best is just a transition into a fully open market," says Allen Oberg, a farmer and the chair of the board. 

Oberg cites the example of Australia, which privatized its wheat board in 1999 and ended its single-desk system in 2008. It didn't last long as a farmer-owned company, and was bought out entirely in 2010.

He is buoyed by a farmer plebiscite the Canadian Wheat Board conducted to back up its position that the majority of the farmers it serves don't want to see the monopoly dismantled.

"This legislation will be about the government's right to remove farmers' control," he says. Farmers have run the show since 1998 legislation that changed the Wheat Board from a Crown corporation into a "shared governance" organization run by a board on which farmer-elected representatives hold a two-thirds majority.

The board will "explore every possible legal avenue" to stop Harper’s plans, Oberg vows, saying "whatever side wins, there will be an appeal."

The CWB used a court challenge to defend its right to market barley in 2007 after the government attempted to remove the single-desk from that commodity without using legislation.

This time, Harper’s government will be using legislation.

Dual marketing: where’s the plan?

Neither the Wheat Board nor the government has offered a comprehensive plan for how a voluntary agency would work. Each side appears to be pointing at the other, saying it's not their job to figure it out.

The government asked for a plan from the agency, and the Wheat Board submitted "advice" two months ago. But the Wheat Board says it isn’t its job to set public policy, particularly when it comes to dismantling itself.

Meanwhile, it isn’t business as usual at the board. It’s stopped issuing contracts that would normally come out in the fall for the following planting season. Two storage programs are also not accepting deliveries for next year.

The government hasn't shared its plan for how a reorganized board could work. But it hasn’t sat still, either.

A call is out for tenders for professional audit services to review the books after the "dissolution or winding up of the CWB" in 2012.

The administration for a Canadian Wheat Board program offering cash advances for wheat and barley crops has been moved to the Canadian Canola Growers Association.

And most significantly, a government-appointed committee of bureaucrats, industry representatives and academics provided recommendations in September for what transport and storage infrastructure and marketing and research capacities a voluntary wheat board might need "to compete."

The government also is working on a rail freight service review to address how grain shipping would work in an open market.

An Ontario model?

The Canadian Wheat Board markets grain that originates inside defined boundaries in Western Canada. Ontario used to have its own single-desk system for wheat, but switched to a voluntary wheat board in 2003, now part of the newly merged Grain Farmers of Ontario, an umbrella group representing corn, soybean and wheat farmers. It markets only a fraction of the total Ontario crop.

"Our farmers are very happy," says Barry Senft, the group's CEO and a grain farmer. Going back to the single-desk system "is not even raised now," he says.

Ontario’s now-voluntary pool had a capital base to start up with, thanks to some private holdings. The CWB doesn’t have that.

"We've never operated like a grain company," Oberg explains, noting all profit is returned to producers.

"We need start-up capital to acquire our own assets and we need a continuation of our [government] borrowing guarantees, or else we're dead in the water on our first day of business," Oberg warns. "We cannot rely on our competitors' facilities to execute sales."

Others disagree, noting Ontario's board didn’t own facilities. Some Western grain elevators have expressed an interest in handling grain for a voluntary Canadian Wheat Board.

Al Mussell, a researcher at the George Morris Centre, an independent agri-products think tank based in Guelph, Ont., notes that while some predicted the Ontario industry would collapse, the actual amount of wheat grown in Ontario is up significantly, buoyed currently by strong prices.

Senft, too, thinks a voluntary board should be able to work out partnership deals. "If there's a need for a particular service, people will organize to address that need," Senft says, although he acknowledged "there will be hiccups." 

Left in the lurch

Manitoba farmer Owen McAuley served on a panel convened by then-minister Ralph Goodale in the late 1990s to consider how the Wheat Board could evolve to meet changing needs. That panel recommended farmers market a certain percentage of the total crop outside the Wheat Board's system, without jettisoning the agency altogether.

He still thinks dual marketing can work, but the transition appears risky at the moment.

"Tell me what the rules are and I'll learn how to play the game," McAuley says. "At the moment, we're all sitting in the middle with no rules."

"Everyone's been hurt a little bit" by the uncertainty, he says.

Food costs more

Read about how food prices are rising, but farmers are still getting only a small fraction of the $2 to $3 price of a loaf of bread.

Even some farmers who aren’t Wheat Board fans respect its track record on delivering premium prices, and give some credit for its willingness to offer different pricing options to mimic the open market. But "price wasn't necessarily the main issue in the discussion," Senft says. "It was also philosophical."

"Either the world is going to end, or it's a communist plot that's been foiled," analyst Mussell says. "The middle ground has been hard to find."

One contradiction remains in the government's position. Clearly it's eager to open the market for Western grains. But that ideology hasn't seen it push to shut down other supply-management systems, like those for the dairy and poultry industries. These also could be seen as "oppressive monopolies," Mussell says.

"It’s hypocritical," Wheat Board chair Oberg maintains. "Supply management is far more restrictive."

But Harper doesn't appear interested in freeing those farmers any time soon.