October 3, 2011 / 6:59 PM / in 6 years

Analysis: Canada farmers brace for life after wheat monopoly

WINNIPEG, Manitoba (Reuters) - The Canadian Wheat Board’s marketing monopoly infuriated Darren Winczura so much that in 2002, he defied Canadian law by carrying a bag of wheat across the U.S. border.

Winczura, who was charged along with about a dozen other farmers in the No.3 wheat exporter, spent a night in a southern Alberta jail and paid a C$900 fine.

Now after generations of passionate, even near-hysterical debate among western farmers, Ottawa is set to introduce legislation within weeks to open the farm belt’s grain market to competition next August. It would end the last major grain supply monopoly in the world, completing a decades-long evolution in which private enterprises have taken over trade.

For the first time since World War II, western farmers would be able to sell wheat and barley to any buyer they choose, rather than just the CWB. Australia ended its own monopoly three years ago, leaving Canada with the last major agricultural marketing monopoly.

The change opens the door for a scramble among major grain handlers like Cargill Inc and Viterra Inc for Canada’s top-quality supplies, and U.S. grain elevators look to swell with Canadian wheat at least in the early days of the open market.

But it is unlikely to upend a long-term trend of declining wheat acreage, as oilseeds and legume crops -- which have thrived in a free-market system -- take more and more land.

Opponents of the monopoly bid good riddance to a system that forces them to sell to a single buyer and leaves them holding their grain while the Wheat Board musters buyers for it.

“As of now, I‘m sitting on about 20-some-thousand bushels of wheat and I can’t move it because the Wheat Board has no sale,” Winczura said. “So my cash flow is tight. It’s just not an organized system.”

In an open system, “you’ll be able to book it off the combine and it will be gone, in and out, not sitting around for months at a time as it is now. You’ve got lots of choices.”

Whether this will mean higher or lower prices for Canadian farmers in an open market is yet to be seen. Either way, the change is unlikely to have much bearing on global prices, given the world’s diminishing reliance on Western Canada’s harvest.

The grain belt’s projected 21.6 million tonnes of all-wheat production this year is about three percent of the world harvest, compared to nearly double that share 20 years ago.

Commercials are already vying for some of the world’s highest quality grains for breads, pasta and beer-making.

“The Wheat Board says we’re stuck with them -- looks like these (grain handlers) are pretty interested in buying it,” said Alberta farmer Bradley Proud, who has heard from a U.S. buyer seeking next year’s durum.

CWB SAYS IT MAXIMIZED GAINS

Some farmers say the handlers long ago gouged their forebears in the era before the Wheat Board, taking advantage of their need for quick payment after the harvest.

The end of the monopoly means farmers will lose clout and forego price premiums in the long run, said Allen Oberg, the Wheat Board’s farmer-elected chairman, whose grandfather farmed in Alberta before the monopoly began 69 years ago.

“There’s probably less competition now than there was then. The players are bigger and stronger and that’s why farmers need an organization with the clout the CWB has,” he said.

In the short term, farmers who have cast longing glances at higher spot elevator prices in North Dakota and Montana will make a run for the border.

But the flood of Canadian wheat into U.S. grain elevators will likely last only until prices even out, say both Alan Tracy, president of U.S. Wheat Associates and Oberg of the Wheat Board, whose organizations have long squared off.

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