June 23, 2011 – Ending the monopoly power of the Canadian Wheat Board (CWB) makes sense, owing to its apparent inability to deliver strong returns for farmers, while limiting farmers’ choices on sales practices, according to a report released today by the C.D. Howe Institute. In “Pulling the Plug on Monopoly Power: Reform for the Canadian Wheat Board,” authors Richard Pedde and Al Loyns point out that owing to declining world market share, there is little possibility of the CWB’s wielding market power and no strong evidence it achieves higher returns for farmers. Its monopoly over Western Canadian wheat and most barley sales therefore should be reconsidered with an eye to ending it, say the authors.
Ottawa has made clear its intention to end the CWB’s monopoly power, which gives it the legal authority to purchase all Western Canadian wheat and barley produced for export and for domestic human consumption. The authors assess the case for reform and conclude that if the CWB cannot demonstrate that sole buying and selling authority is necessary to delivering better prices for farmers, it should not have that authority.
The CWB’s existing infrastructure and the expertise and worldwide distribution of its trading staff make it both an attractive pool for farmers to voluntarily participate in and successfully sell their grain in world markets, say the authors.
Were the CWB a voluntary organization, many farmers would choose to pool their grain through it, to reduce their individual exposures to fluctuations in wheat prices, and to take advantage of economies of scale in marketing and transportation. Existing, for-profit companies provide these services for other grains, and a non-compulsory CWB could compete with these firms for farmers’ business.
The world wheat market has changed and grown, the authors conclude. If justification ever existed for the CWB’s mandatory status, on the basis that its world market power enabled it to generate better prices for domestic farmers, it seems to have passed. It is time for reform.
Click here for the full report.
For more information contact:
Richard Pedde, farmer and former derivatives trader;
Al Loyns, former farmer and Professor of Economics, University of Manitoba;
Ben Dachis, Policy Analyst,
C.D. Howe Institute;
416-865-1904
Email: cdhowe@cdhowe.org