Friday, May 20, 2011

Moving forward: farmer advocacy on trade issues

The CWB has often been presented as working for farmers on many trade issues.  About advocacy, the CWB website states “The CWB is a strong voice on behalf of farmers on trade, transportation and agriculture policy.”

In a recent article in the Winnipeg Free Press, Laura Rance’s explanation of Canada/US trade in wheat is an excellent example of how this has been misrepresented over the years.  The following is an excerpt from her May 7th article, “Wheat Board’s Going: Now What?”

Many farmers think that if freed of the pooling system, they could simply sell everything to the United States. In an open market, they would be free to try.
Here's the catch. Long lines of Canadian grain trucks at northern U.S. grain elevators will be about as welcome as a snowstorm in May -- especially if those deliveries plug up the pipeline or have an effect on prices, either real or perceived. Just ask softwood lumber, cattle and hog producers. A trade backlash that makes crossing the border prohibitively expensive is almost inevitable.
The Canadian Wheat Board has spent nearly $18 million fighting 14 trade cases with the United States since the implementation of the Canada-U.S. Trade Agreement, which supposedly secured Canadian access. Under a voluntary CWB, the task of taking on U.S. trade law will fall to commodity groups and taxpayers through federal and provincial governments.
According to Rance and other single desk supporters and guardians, without the CWB single desk, farmers will be lining up to deliver into the US market.  And in the worst case, the US will retaliate with yet another countervailing tariff or trade challenge.

What she fails to understand is that the 14 trade challenges brought down by the US were all against the CWB itself – not against wheat imports per se.  The following statement by the North Dakota Wheat Commission (NDWC) explains their motivation (my emphasis):

“Our reason for bringing these trade inequities forth and persisting in getting them remedied is that the Canadian government policies enabling the Canadian Wheat Board and its practices hurt U.S. wheat farmers," notes NDWC Administrator Neal Fisher. "Today's announcement shows the seriousness of the United States to rectify the longstanding unfair activities of the Government of Canada and the Canadian Wheat Board." He adds that in the various trade challenges going forward "there may be ups and downs because of specific legal requirements, but we are in this until the CWB is reformed."

With a voluntary market, Western Canadian farmers may well load up their trucks with wheat and head south as some believe, but the irritant for the US farmer and organizations like NDWC – the single desk – will not be involved.  Canada and the US have an excellent long-standing trade relationship in many agricultural commodities with no restrictions - oats, canola, flaxseed, soybeans and corn; there is no reason to believe that wheat and durum will be any different once the single desk is gone.  

Another thing to think about is the change in US cropping patterns we’ve seen and likely to see in the future.  The US has seen its oat crop reduced over the last couple of decades as the various US Farm Bills favoured the production of other crops.  US oat processors seem to be happy to import Canadian oats to fill the gap; US farmers seem indifferent.  In addition, corn and soybeans are being grown in greater numbers in both North Dakota and Minnesota, displacing spring wheat, causing a drop in spring wheat acres and production.  This trend in cropping patterns – because of crop genetics or climate change (take your pick) – is expected to continue, displacing even more spring wheat acres.  As the US grows less spring wheat in favour of row crops, Western Canada should be poised to fill the gap – just as we did with oats.

Rance suggests that “under a voluntary CWB, the task of taking on U.S. trade law will fall to commodity groups and taxpayers...”  First, as indicated above, the prospect of a trade challenge on wheat drops dramatically with the removal of the single desk.  Even so, if there is a challenge, there is no doubt that there will be an industry group representing wheat interests that will step up to the plate.  That group can follow the lead of Pulse Canada on glyphosate residues in Europe, the Flax Council on Triffid flax in Europe, the Canola Council on salmonella in meal into the US and others.  It is already being done with other commodities; it will also be done with wheat and durum.  And yes, there will likely be a checkoff to pay for the activities of this new wheat organization, but how is that different than farmers paying for it via the CWB?  Oh yeah – checkoffs are voluntary.

Once the Western Canadian market is liberated, I suspect we will see some trucks heading south, but I still maintain that the Canadian and US markets will arbitrage – prices will equalize due to competition.  Fostering competition will be an important and fundamental aspect of the transition to an open market; having an open border and competitive truck rates not only opens up the US market, it adds competition for farmers’ grain.  And that’s a good thing.

There will be many challenges as we go from a single desk environment to a voluntary CWB with a more “open market”, but concerns over trade with the US shouldn’t be one of them.

Next:  Rail transportation.

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