2012 will be a year of hope and uncertainty for wheat and barley farmers now that a new law has put an end to the single-desk Canadian Wheat Board.
Governor General David Johnston signed Bill C-18 into law last Thursday after months of controversy. The bill ends the single-desk policy for wheat and barley sales in Western Canada, and will allow farmers to sell those crops outside of the board’s pool-price system after Aug. 1, 2012 — the start of the next crop year. It also creates a government-appointed voluntary Canadian Wheat Board for farmers who wish to sell their grain as a pool.
That means farmers can now lock in prices for their 2012 wheat and barley crops like they can for canola, says Henry Vos, the former Canadian Wheat Board representative for Sturgeon County.
“As of today, the law of the land says it’s a competitive marketplace out there.”
St. Albert-area farmer Walter Tappauf said he signed a contract to sell 60,000 bushels of wheat outside the board less than a day after the bill became law.
“I can lock in a profit, I can deliver off the combine,” he said of the new, post-single-desk world. “If we had this opportunity last year, our farm would have been $3 million ahead.”
All this could change pending a court challenge by the former elected directors of the Canadian Wheat Board, all of whom were dismissed after the passage of the law. The law eliminated the board’s elected directors and replaced them with an appointed board. They’ve asked the courts to stop the act’s implementation due to a ruling by the Federal Court, which determined that the passage of the act broke the law. The government has appealed that ruling.
These court challenges make the future of western Canadian farmers very uncertain, said Ken Rosaasen, an agricultural economist at the University of Saskatchewan. “There could have been a lot more certainty and a lot lower transition cost if [the government]had followed the law.”
The Conservatives introduced Bill C-18 earlier this year. A federal court ruling later found that the bill violated the Canadian Wheat Board Act, as the government had not held a producer vote before changing the board’s single-desk policy. The court did not, however, order the government to stop passage of the bill.
Rosaasen said he was shocked when the governor general approved the bill.
“Governments are able to make the law, but they should not be able to break the law.”
He blasted the government for forging ahead with the bill without studying its economic impacts.
“You wouldn’t have a private firm making a $7-to-$10 billion decision (the present value of the annual returns of the single desk) on the basis of one consulting study run through one econometric model, when all of the prestigious academic articles are on the other side.”
Brave new world
While Rosaasen predicted that the end of the single-desk could cost farmers about $500 million a year, citing studies of the policy’s effect on prices, analyst Al Mussell of the George Morris Centre, an agricultural think-tank based in Ontario, said it could also lead to more value-added businesses such as pasta plants.
“I don’t think that immediately you’re going to see a whole lot of change,” he said, but there’s definitely potential for new investment.
It would definitely affect cash flow, Mussell said, as farmers could now receive full payment for their crop upon sale instead of waiting for months afterward as they did under the board. Since pool prices are set based on an average of all sales, the board couldn’t pay farmers until all those sales were done.
And it would make grain prices far more transparent, he continued. Instead of receiving a single, pooled price from the board, farmers can now shop around at local elevators. “I can assess for myself the value of the grain at my farm.”
This was a great day for western Canadian farmers, Tappauf said, as it meant they could finally cut loose from the “anchor” that is the Canadian Wheat Board.
“We’ve lost millions of dollars on our own farm just because of the wheat board.”