Canada to Dismantle Grain-Marketing Monopoly


The following article is from Reuters:

by Rod Nickel

  • Gov’t to guarantee CWB loans, initial payments to farmers
  • No seed capital, regulated access to grain handlers
  • Farmer-elected directors to be removed after bill passes
  • Board must come up with business plan for open market


WINNIPEG, Manitoba, Oct 18 (Reuters) – The Canadian government put forward long-promised legislation on Tuesday to dismantle the grain-marketing monopoly in Western Canada, and gave the Canadian Wheat Board 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.

It also said it would remove the 10 farmer-elected directors on the board, leaving government appointees in charge, after the legislation is approved.

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.”

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 Aug. 1, 2012, the start of the 2012-13 crop marketing year, Ritz said.

After the legislation is approved, the CWB would have to draft a sustainable business plan, which it would implement in the fifth year.

If it comes up with no plan acceptable to the federal government, the board could be shut down, said a federal agriculture official.

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

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 Incown 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.

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

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

The CWB’s elected chairman, Allen Oberg, vowed on Monday to fight the government’s bid to end the monopoly. But once the House of Commons passes the new legislation, Ottawa will remove all 10 farmer-elected directors, including Oberg, leaving in place Chief Executive Ian White and four other federal appointees.

The board will hold a news conference later on Tuesday.

The Conservatives hold a majority of seats in the House of Commons and don’t need support from opposition parties to pass legislation. Nonetheless, opposition politicians have promised to try to slow down the legislation.

“What they’re doing today is … illegal,” said Wayne Easter, a Liberal Party legislator.

The Wheat Board’s Oberg said this week that the board would consider legal action against Ottawa, because the law currently requires farmers to decide any change in the CWB’s mandate.

In a non-binding Wheat Board vote during the summer, 62 percent of farmers who responded voted to keep the CWB’s marketing monopoly for wheat and 51 percent favored keeping the current system for barley.

Source:  Reuters

Posted by Haylie Shipp


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