WINNIPEG, Manitoba (Reuters) - The days are numbered for the world’s last major agricultural marketing monopoly after the Conservative Party won a majority this week.
The Canadian Wheat Board, which has controlled exports from the world's ninth-biggest producer since before World War Two, would be forced to compete with companies like Viterra Inc VT.TO and Cargill Inc CARG.UL as the government follows through with its pledge to open the market.
Conservative Agriculture Minister Gerry Ritz, fresh off the election trail, told Reuters on Tuesday he was confident the Winnipeg-based board could survive. But a similar group in Australia, despite owning physical terminals that the CWB lacks, lasted less than three years after losing its monopoly.
The upheaval should delight private companies eager to expand in the market, and some think it could spur more investment to entice farmers into expanding Canada’s wheat area, which shrunk by nearly one-third between 1991 and 2009.
“There’s going to be some changes coming, absolutely. But the board will remain.” said Ritz, whose Conservative Party won a majority government on Monday, giving it the legislative clout to strip the board’s 76-year-old monopoly and allowing Western Canada’s farmers a choice in who they sell to.
“This theory that the board is going to shrink and disappear is absolutely ridiculous.”
Canada is the world’s biggest shipper of spring wheat and durum, mostly through Wheat Board sales.
The Wheat Board does not own crop storage facilities or port terminals, but instead moves grain through private firms. That system could continue even if the Wheat Board becomes a voluntary pool to compete with the grain handlers, Ritz said.
“I was not shy about raising this at every whistle stop that I made in Saskatchewan in eight different (electoral districts), plus my own,” Ritz said. “No one threw eggs at me. There’s some concern we’re going to throw out the baby with the bathwater (but) I told everyone not a chance.”
NOT SO FAST...
But Wheat Board chairman Allen Oberg, an Alberta farmer, said the former Australian Wheat Board lasted less than three years without its grain monopoly before selling off its assets, despite having grain-handling facilities.
The CWB’s lack of assets would leave it “completely reliant” on rivals to carry out its sales, Oberg said.
“Could the Canadian Wheat Board exist as a brokerage organization? Perhaps, but it would be a very different Canadian Wheat Board,” Oberg said.
In the Canadian province of Ontario, a voluntary marketing organization replaced the monopoly wheat seller, but it runs on a smaller scale than the CWB.
The board cannot compete head-on with private sellers who own supply pipelines, said Brian Oleson, head of the University of Manitoba’s department of agribusiness.
“There is no middle ground,” he said. “(The board) is not a grain company in that sense.”
But Brenda Tjaden Lepp, chief analyst at Winnipeg-based FarmLink Marketing Solutions, said farmers would be best off if the Wheat Board sticks to what it does well.
“Developing relationships with end-use customers has been the board’s real strength. Getting the grain in position at port has always been a big pain.
“To me, those things don’t fit together.”
The board could team up with independent grain companies and shippers to form a supply pipeline even if the big players shut out the CWB.
“They haven’t been very creative in their thinking about this and that’s a shame,” Tjaden Lepp said.
NO VOTE FOR FARMERS
Ritz said he will not hold a vote by farmers to decide whether the Wheat Board keeps its monopoly, but said the government will consult farmers before taking action.
A federal law, the Canadian Wheat Board act, gives the board its monopoly, but it is led by a board controlled by farmers elected by other farmers.
A farmer plebiscite should be held to decide the monopoly’s fate, Oberg said.
“We respect the results of the election, we’re hoping the government respects the Wheat Board’s democracy as well.”
Opening up choice for farmers could benefit farmers by attracting more private investment to improving grain varieties, Ritz said.
“Innovation has been stifled because farmers are saying, ‘I’m not going to spend a lot of money on this crop because I can’t pick and choose when I can sell it.’”
Agriculture researcher Larry Martin also sees room for investment.
Wheat millers and barley maltsters would have more reason to build facilities in Western Canada if they could buy grain directly from farmers, rather than at higher rates through the board’s single desk, said Martin, senior research fellow at the George Morris Center.
Reporting by Rod Nickel; Editing by David Gregorio and Lisa Shumaker
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