October 18, 2011 / 1:07 PM / 6 years ago

Canada to downsize Wheat Board, end grain monopoly

<p>Canadian wheat grows in a field near Teulon, Manitoba, July 26, 2006. REUTERS/Shaun Best</p>

WINNIPEG, Manitoba (Reuters) - The Canadian government put forward long-promised legislation on Tuesday to dismantle Western Canada’s grain-marketing monopoly, and gave the Canadian Wheat Board (CWB) five years to implement a business plan to survive in an open market.

In draft legislation presented to Parliament, the Conservative government offered the CWB certain financial guarantees, but said it would not provide seed capital or regulated access to grain handlers after the board loses its grain marketing monopoly.

The monopoly’s removal would allow western farmers to sell directly to grain handlers, instead of marketing those crops only through the Wheat Board.

“The sky will not fall in an open market,” Agriculture Minister Gerry Ritz said at a press conference on an Ottawa-area farm. “Instead, the sky will be the limit.”

Canada is the world’s biggest exporter of spring wheat, durum and malting barley, mostly through the Wheat Board.

Ottawa also plans to remove the 10 farmer-elected directors on the board, most of whom favor keeping the monopoly, leaving government appointees in charge.

“This is not about putting farmers in the driver’s seat, it’s about removing us altogether and handing the steering wheel to huge, foreign corporations that control the world’s grain trade,” said Allen Oberg, a farmer-elected director and chairman of the Wheat Board.

The Conservatives hold a majority of seats in the House of Commons and don’t need opposition support to pass legislation.

Once the legislation receives final approval, likely by late 2011 or early 2012, farmers and grain companies will be able to sign forward-pricing contracts for Western Canadian grains, effective August 1, 2012, the start of the 2012-13 crop marketing year, Ritz said.

The CWB would have to draft a sustainable business plan during the first four years of the open market, which it would implement in the fifth year.

The draft legislation said Ottawa would continue to guarantee Wheat Board borrowing and the board’s initial payments to farmers for up to five years, and help with downsizing costs.

WHEAT BOARD LACKS FUNDS, ASSETS

The assistance falls well short of requests by the CWB as it moves to compete in an open market system.

The Wheat Board, which had revenues of C$5.8 billion ($5.7 billion) in 2010-11, has no retained earnings or grain-handling facilities of its own and had asked for both seed capital and regulated access to grain facilities owned by other companies.

Viterra Inc, Richardson International Ltd and Cargill Inc own the largest networks of grain-handling elevators and port terminals in Western Canada.

Ritz said Ottawa will monitor anti-competitive behavior by companies that own Western Canada’s grain-handling facilities.

Opposition legislator Pat Martin of the New Democratic Party said the Conservative government seemed determined to take Canada back to the 1920s.

“Back in the bad old days it was the robber barons and the railroad barons that were gouging Canadian farmers so they banded together to protect their own interests ... There’s not a shred of research or cost benefit analysis that says that Prairie farmers will be better off,” Martin told reporters.

The government’s guarantees improve a voluntary Wheat Board’s chances of survival, but farmers would not benefit as much they now do from the marketing monopoly, Oberg said.

By not providing money and regulated access, the government appears to be leaving the board’s survival up to the farmers who still support it, said grain industry analyst Ron Frost.

“It gives the optics of saying, ‘We will give you a little bit of help but you’re going to have to have the initiative to find people who are willing to support you’,” Frost said.

Ritz did not rule out allowing an outright sale of the Wheat Board, which has highly regarded contacts with importers in other countries.

CWB chairman Oberg said the board will look at legal options next week to block the bid to end the monopoly.

The law currently requires farmers to decide any change in the CWB’s mandate through a vote.

The government’s removal of farmer-elected directors from the board continues the Conservatives’ “anti-democratic” approach to the Wheat Board, said National Farmers Union of Canada president Terry Boehm.

“(Farmers) have elected directors and this government is going to get rid of them,” he said.

Boehm doesn’t expect the Wheat Board to survive in an open market, but others said farmers will thrive.

“I‘m going to see more companies want to buy my grain,” said Stephen Vandervalk, president of the Grain Growers of Canada. “The more competition the better.”

For grain handlers, the legislation is a relief because it doesn’t give the Wheat Board an unfair advantage, said Wade Sobkowich, executive director of the Western Grain Elevators Association.

($1=$1.01 Canadian)

Additional reporting by David Ljunggren and Louise Egan in Ottawa; editing by Rob Wilson and Peter Galloway

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