June 29, 2011 / 3:13 PM / in 6 years

Government may fund Wheat Board's move to open market

WINNIPEG, Manitoba (Reuters) - The government would consider giving the Canadian Wheat Board short-term capital to help it adjust to an open market once Ottawa removes its grain monopoly, Agriculture Minister Gerry Ritz said on Wednesday.

<p>A farmer drives a combine to harvest wheat in Zouping county, Shandong province, May 30, 2011. REUTERS/China Daily</p>

Ritz, speaking to reporters in Winnipeg, said funding would depend on the board presenting a suitable business plan.

“We’ll have a look at all the options moving forward. Something in the short term? Absolutely, (but) we’re not here to make sure the entity survives in perpetuity. They’ll have to show us a strong business case in the mid- and long-term,” he said.

“This is not a blank check.”

Canada’s Conservative government plans to pass legislation this autumn to scrap the world’s last major agricultural monopoly as of August 2012. The Wheat Board and some farm groups say farmers, not politicians, have the legal right to decide its future.

The Wheat Board has said that to compete in an open system, it will need capital, as well as grain-handling and storage facilities.

To be sustainable in the long term, the Wheat Board needs government support, said Chairman Allen Oberg. That could come from Ottawa continuing to guarantee the CWB’s borrowings -- which allows it to borrow more money and at lower rates than it otherwise could -- or providing funding to buy grain and build up handling facilities, he said.

“It’s clear from the start (Ritz) hasn’t done any analysis on this issue, doesn’t seem to have a vision for what a new organization might look like,” Oberg said.

In an open-marketing system, the Wheat Board would be competing with top grain handlers Viterra Inc, Richardson International Ltd and Cargill Inc.

Those grain handlers currently work with the Wheat Board by storing farmers’ grain and handling some export sales.

“Obviously, we don’t want a legislated or government-supported advantage given to a player, but we’re prepared to compete on a level playing field,” said Jean-Marc Ruest, vice-president of corporate affairs at Richardson.

Whether government capital would be deemed an advantage for the Wheat Board depends on if it’s a gift or repayable loan supported by the board raising its own capital from farmers, Ruest said.

The board is drafting a plan to become a grain company that sets out necessary government supports.

One of those would be regulated access to grain handlers’ facilities at competitive rates and times, Oberg said.

Private grain handlers would still want to work with the CWB after its monopoly ends because it has a loyal farmer base and key contacts with export customers, Ruest said.


In a speech earlier Wednesday to the Grain Growers of Canada, Ritz said the Wheat Board’s monopoly is weakening the country’s clout in the world wheat and barley trade.

Canada is the world’s top exporter of spring wheat, durum and malting barley, the crops the CWB exports from Western Canada. The board had revenue of nearly C$5.2 billion ($5.3 billion) in 2009-10.

But Canada is still falling short of its potential because of the current grain-marketing system, which requires western farmers to sell wheat and barley for export and human consumption via the board, Ritz said.

“What was once Canada’s signature crop has fallen behind,” Ritz said.

Canada’s all-wheat and barley exports represent smaller market share than they did decades ago, Ritz said.

Farmers’ switch from planting wheat to oilseeds is a global trend, but the drop-off in wheat acres has been more acute in Canada than globally.

Wheat acres have also declined in the United States, where there is already an open grain market, Oberg said.

“(Ritz) is trying to muddy the waters.”

Editing by Rob Wilson

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