Remember the “market freedom” the Harper Government was congratulating itself so heartily for delivering to Western Canada’s grain farmers a few weeks ago?
Gee, who’d have predicted that?
An editorial last Monday in the Saskatoon Star Phoenix quoted Vergreville-Wainwright Tory MP Leon Benoit complaining that wheat that sold a year ago for $9 a bushel is now fetching less than $4 for the farmers who grow it.
Indeed, right at the moment you could argue the price of wheat on the Prairies has for all intents and purposes fallen to zero, because privately owned inland terminals aren’t even accepting the stuff at the moment.
Alas, Mr. Benoit, loyal Harperite that he is, didn’t quite connect all the dots. Still, his lament is a good starting point for a discussion of what the heck’s going on in the grain-growing regions of Western Canada.
How do we explain the gap between the low farm-gate prices Mr. Benoit has rightly identified and world prices for wheat and barley that are both higher and stable? This is a particularly good question in a year when crops on the Canadian Prairies are relatively good in both volume and quality, if not quite the bumper crop the media has claimed – and crops are lousy in lots of other places, including the United States, which is still recovering from the drought of 2012.
If you believe the mainstream media, it’s all because of a shortage of grain cars. A recent story in the Globe and Mail even suggested that there aren’t enough grain cars because so many rail cars are being used to ship oil, leastways, that’s the way I read it.
But you can set your minds at ease, readers: oil and grain aren’t shipped in the same kind of rail cars, and even die-hard advocates of the petroleum industry will probably agree that’s just as well! As an aside, if you’re going to use the Globe as your prime source of agricultural news, you should probably stick to its stories about pigs with diarrhea and the porcine antics of Toronto’s mayor!
The tank-car explanation doesn’t really hold water either – or maybe that should be crude oil. At present, there are only limited numbers of tanker cars in use by the railways anyway, and most of them are going south loaded with light crude, not west full of bitumen. So they can hardly be blamed for problems on the lines to Vancouver and Prince Rupert just yet.
Which is not to say that the grain transportation system isn’t pretty chaotic right now, just not for the reasons you’ve been told.
The real problem, as farmer Bill Gehl, chairperson of the Canadian Wheat Board Alliance, a group representing farmers who tried to save the board, said last November is that “without the farmer-controlled single-desk Wheat Board, nobody is coordinating grain sales, transportation logistics, and the efficient use of port terminal facilities.”
That, in turn means “port terminals are now competing with each other to use rail transport capacity just to generate grain handling revenue.
Naturally, this isn’t something we should expect Mr. Benoit to point out.
As explained by Ken Larsen, a CWBA supporter and the author of an indispensible blog on this issue, back in the day farmers could tell the farmer-owned Wheat Board the type, quality and amount of the crop they wanted to sell. The Wheat Board would sell it directly to end-use customers around the world and negotiate efficient rail delivery to the best terminal for the shipment.
Since the Wheat Board had the “single desk” it was the de facto manager of the port terminals that shipped wheat and barley. It also matched the grain ship to the overseas customer’s terminal since not all terminals can handle all ships. In addition, it made room in the system for canola sales at good prices.
“That is all gone now,” says Mr. Larsen, who farms near Sylvan Lake, Alberta.
“Ottawa killing the single desk Wheat Board has removed one of the very few balancing forces in a system that is otherwise dominated by just two oligopolies,” Mr. Larsen wrote in a recent post on his blog. That is, “the railways and the small number of companies with terminal elevators in ports.”
Naturally, companies owning both inland terminals and port terminals are more interested in keeping grain moving through their own systems than looking out for the overall performance of the system and customer service as the Wheat Board did, Mr. Larsen explains.
There are other factors at play as well. With the ports in a mess, and not enough places to store the stuff on the Prairies, private-sector grain buyers can offer what they like and farmers don’t have much choice but to take it.
Added together, Mr. Larsen says, “this is truly a train wreck of immense proportions. If we assume last year’s western crop was worth about $7 billion, it means more than $2.8 billion has been taken out of the west’s economy!” Include the effect of the drop in the U.S. dollar, since most grain is sold in that currency, the actual decline has been more than 50 per cent.
Another thing Canadian farmers will soon be free of is the excellent reputation Canadian wheat and barley had with buyers abroad – Japanese and Chinese end users are already complaining the new privatized Canadian system isn’t delivering the quality they’ve expected for generations from the Wheat Board.
Over time, this too will reduce the prices farmers get for Canadian grain.
Back in the day, as the SP editorial also pointed out, “western farmers who wanted to export grain relied on the Wheat Board to pool their production and profits, make the international sales and secure fairer shipping terms with the rail companies. Mr. Ritz and the Stephen Harper government freed them from all that.” (Emphasis, as always, added.)
Ah yes, freedom.
Messrs. Harper and Ritz gave them farmers “freedom,” of course, as part of the government’s continuing campaign to eliminate all co-operative ventures and hand over the work they did to the for-profit, globalized corporate sector – leaving all of us a little poorer except about, oh, 1 per cent.
This post also appears on Rabble.ca.