The Canadian Wheat Board


by Rhonda Parkinson
Originally published by Maple Leaf Web, Department of Political Science, University of Lethbridge (publication date: October 25, 2005).
Note: This is the original feature, written solely by Rhonda Parkinson. It has not been altered or updated by another author.

Wheat is Canada’s major crop. While wheat is grown commercially in every province with the exception of Newfoundland & Labrador, over 95 percent is grown in Western Canada, particularly the three Prairie provinces. Each year, millions of bushels of durum and other types of wheat are transported by railcar to shipping terminals in British Columbia and Ontario, where they are shipped to over 80 countries worldwide.

In the early days of farming, however, the financial benefits of Canada’s thriving wheat industry did not always trickle down to farmers. Throughout the 1920s and 1930s, farmers actively lobbied for a government agency to control the marketing of wheat. Today, the Canadian Wheat Board is the sole marketer of western Canadian wheat (and barley) that is sold for human consumption, both domestically and abroad. 

Nonetheless, despite the fact that farmers were the driving force behind its creation, support for the Canadian Wheat Board among some farmers has fallen in recent years. While some farmers merely want to have a choice between selling their wheat to the Canadian Wheat Board and marketing it independently, others favour the return to a completely open market. Internationally, the Canadian Wheat Board’s unusual “shared governance” structure is under attack by countries which claim the Board is unfairly subsidized under international trade laws.

This feature explores the origins, role, and structure of the Canadian Wheat Board, and domestic and international pressures on the Canadian Wheat Board. It is broken down into the following sections:

What is the Canadian Wheat Board?

Overview of the guiding concepts behind the Canadian Wheat Board.
 

History of Wheat Regulation in Canada

Events leading to the formation of the Canadian Wheat Board.
 

The Structure of the Canadian Wheat Board

The corporate structure of the Canadian Wheat Board.
 

How effective is the Canadian Wheat Board?

Tables examining Canada’s wheat production and share of the international market.
 

Internal Pressures on the Canadian Wheat Board

Do farmers need the Canadian Wheat Board?
 

External Pressures on the Canadian Wheat Board

Pressure from international trade organizations may eventually force change upon the Canadian Wheat Board.
 

Links and Further Information

What is the Canadian Wheat Board?

Overview of the guiding concepts behind the Canadian Wheat Board.

In Canada, the marketing of all wheat and barley grown in the Western provinces, for human consumption, is handled by the Canadian Wheat Board. The Canadian Wheat Board (CWB) was born in the depression era of the 1930s, when unprecedented drops in the worldwide price of wheat resulted in bankruptcy for many farmers, and threatened the economic collapse of provincial governments in Western Canada.

At the micro level, the Canadian Wheat Board attempts to stabilize the market for individual farmers, protecting them from unanticipated sharp fluctuations in the price of wheat. A broader objective is to prevent unexpected shocks to the Canadian economy. (As one of Canada’s major exporters, the CWB oversees the export of over $4 billion worth of wheat annually; a sharp drop in wheat export sales would have a noticeable impact on the Canadian economy).

As with any marketing agency, the goal of the Canadian Wheat Board is to obtain the best possible price for its product. Its day-to-day operations are based on three guiding principles:

Single Desk Selling:

The Canadian Wheat Board has exclusive authority over the marketing of wheat and barley grown in Western Canada, both for the domestic and international markets (a minor exception is barley used for feed grain instead of human consumption). Farmers are not free to sell their grain independently, but must deliver it to the Canadian Wheat Board. This approach is based on the belief that a single organization representing all of Canada’s Western grain farmers (a ‘single desk’) will have more clout negotiating the best price for wheat and barley on the open market than individual farmers. Furthermore, since the Canadian Wheat Board has a record of the type, grade, and quantity of grain produced by each farmer, it is able to enter into contracts to deliver grain to buyers at a specific date in the future (commonly referred to as “futures contracts”), knowing these contracts can be fulfilled.

In order to ensure that grain is collected from individual farms, stored, and transported to shipping terminals as efficiently as possible, the Canadian Wheat Board is responsible for overseeing the storage, cleaning, and transportation of the grain to points where it is shipped overseas. However, the CWB does not own any grain elevators or railway cars. Instead, it enters into contractual agreements with grain elevator operators, rail operators, and shipping terminals.

Price Pooling

The Canadian Wheat Board operates as a collective, with the risks and rewards shared equally, or “pooled,” among its members.  Price pooling operates in the following way:

  • At the beginning of the crop year, the Canadian Wheat Board sets the price it will pay for wheat, durum wheat, barley, and designated barley (used primarily in brewing). The price varies depending both on the specific type of grain and the quality or “grade” of the grain.
  • Farmers are guaranteed to receive this price for their grain, regardless of any changes or developments in grain prices or the demand for grain throughout the crop year.
  • The farmer signs a delivery contract with the CWB, specifying the type, grade, and amount of grain s/he wishes to deliver. However, the CWB is not obligated to purchase the amount of grain specified in the contract. Market conditions will determine how much grain the Board accepts from the farmer throughout the crop year.
  • The Board is obligated to sell any grain that it calls to be delivered. If the Board is unable to sell the grain in the current crop year, it is set aside to be sold in the next crop year.
  • Upon delivering the grain, the farmer receives an initial payment for the grain, based on the price set by the CWB for the different types and grades of grain.
  • Farmers are individually responsible for transportation charges to deliver the grain to a terminal and these are deducted at the time s/he receives the initial payment. These charges may also include storing the grain in a grain elevator, cleaning the grain, and any freight charges to transport the grain to the nearest port.
  • The CWB continues to purchase grain from farmers throughout the crop year, based on market demand.
  • The money from the sale of these grains is pooled into one of four pools, based on the type of grain (wheat, durum wheat, barley, and designated barley). Depending on sales and whether the price of grain rises or falls, farmers may receive additional payments (called adjustment or interim payments) throughout the year.
  • At the end of the crop year, the total amount in the pool is calculated, and expenses, marketing, and operational expenses for the Canadian Wheat Board are deducted. Any additional transportation expenses, such as shipping charges, are also deducted at this time.
  • All excess revenue is returned to the farmers. Each farmer receives a portion of the pool, based on the proportion of grain s/he delivered.

Under price pooling, a farmer receives the same price for his/her grain, regardless of when it was actually sold. Furthermore, the costs incurred with operating the CWB are shared equally among all farmers. From the farmer’s perspective, price pooling provides a safeguard against fluctuating prices; the amount s/he receives from the Canadian Wheat Board does not vary depending on when the grain is delivered. On the other hand, combined with the Board’s monopoly over selling wheat, it prevents the farmer from taking advantage of any sharp spikes in grain prices.

Government Guarantee

If the total revenue from the grain, minus expenses, is less than the initial payment made to farmers, the federal government guarantees to make up the difference. The Government of Canada also guarantees Canadian Wheat Board borrowing (currently totalling approximately $6 billion), which allows the Board to obtain loans at more favourable interest rates than would otherwise be the case. Finally, if a buyer of Canadian grain defaults on payment to Canadian Wheat Board, the federal government guarantees to absorb the costs of the defaulted payment.

Of all the federal government guarantees to the Canadian Wheat Board, the initial payment has received the most criticism as being a subsidy to farmers. However, it is important to note that the initial payment is only (approximately) 75 percent of the expected market price of the grain throughout the crop year. There have only been a few occasions where the federal government has been forced to back up the guarantee after wheat prices for the crop year dropped unexpectedly. The most notable example to date came in the 1990-91 crop year, when the federal government was forced to pay over $670 million.

The following table illustrates the concept of price pooling and the initial payment system:

Canada Wheat Board Payments for No. 1 Canada Western Red Spring Wheat, 1994-94 to 2003-04, dollars per bushel

Pool
Account

Initial Payment

Adjustment Payment

Interim Payment

Final Payment*

Final Realized Price*

1994-95

125.00

67.00

10.00

8.38

210.38

1995-96

175.00

86.00

-

10.75

271.75

1996-97

200.00

10.00

-

14.88

224.88

1997-98

147.00

42.00

8.00

14.68

211.68

1998-99

151.00

39.00

9.00

8.54

207.54

1999 – 2000

144.30

38.00

5.00

5.13

192.43

2000-01

149.60

41.70

7.00

4.28

202.58

2001-02

169.20

29.10

8.00

10.72

217.02

2002-03

155.20

95.00

-

-

250.20

*Final payment and final realized price after deduction of costs
Source: Canadian Wheat Board

What About the Eastern Provinces?

Currently, the Canadian Wheat Board does not exercise authority over the marketing of wheat and barley grown outside of the four western provinces. While Western Canada, particularly the three Prairie provinces, produces over 95 percent of Canada’s wheat and barley for sale, wheat is grown commercially in all provinces with the exception of Newfoundland & Labrador. In Ontario, which produces approximately four percent of Canada’s total wheat for export, wheat is marketed through the Ontario Wheat Producers’ Marketing Board. The remaining provinces market wheat and other grains that are grown through a variety of marketing schemes. (There are no commercial agricultural crops grown in the northern territories).

History of Wheat Regulation in Canada

Historical overview of events leading up to the formation of the Canadian Wheat Board

The basic concept behind the Canadian Wheat Board, that a single organization will have more power negotiating contracts for the sale and transportation of grain than individual farmers, is not a recent development; it has its origins in economics, and the law of supply and demand.

Wheat and other grains have what economists refer to as “an inelastic demand”: the price of the product has to rise or fall significantly for there to be a noticeable impact on demand for the product. For example, consumers’ demand for bread (milled from wheat) tends to remain fairly constant. Accordingly, it would take a sharp increase or decrease in the price of bread to have a significant impact on the total quantity of wheat purchased.

The economics of farming mean that farmers do not necessarily benefit from a “bumper” harvest. If the majority of farmers have a good harvest and there is a surplus of wheat, it takes a significant drop in prices for farmers to sell all their wheat. Further to this, individual farmers tend to sell wheat at the peak time of the harvest, when the supply is greatest. This is understandable, as farmers must pay their bills for the year, want to reduce interest charges on bank loans, and may lack sufficient storage capacity to store the grain and wait until the supply drops and prices rise to sell. However, it means they are unable to take advantage of any shifts in the price of wheat that may come later in the year.

Historically in Canada, however, while individual farmers were at the mercy of market conditions, elevator operators and other stock market speculators were able to take advantage of the situation through “hedging” and “futures trading” on the market. For example, elevator operators would buy the grain from the farmers, keep the grain in storage, and then sell to a buyer when prices rose.

In 1917, the Canadian government attempted to put a stop to market speculation on grain by setting up the Board of Grain Supervisors. The Board operated on the same principles as the current Wheat Board: trading on “wheat futures” was suspended, and the Board assumed control over the collection, delivery, and selling of wheat for export. The idea of an initial payment to farmers was also introduced at this time, as the Board was unable to determine the final price of wheat until the completion of the crop year. 

In 1919, the federal government replaced the Board of Grain with the first Canadian Wheat Board, which operated by the same principles.

While farmers supported the introduction of government controls over grain marketing, the Canadian government viewed this as a temporary measure, undertaken to prevent speculation and hoarding which could lead to worldwide food shortages in the aftermath of World War I. The government dismantled the Canadian Wheat Board at the end of the 1919-20 crop year. Farmers responded with several efforts to reform the system, both at the political level and through the creation of “Wheat Pools”:

At the political level - In the 1920s, several farmer-based political parties achieved a measure of electoral success that would prove crucial to developments. At the federal level, the Progressive Party elected 64 MPs in the 1921 federal election. In the House of Commons, the Progressive Party lobbied for a return of the Canadian Wheat Board. Ultimately however, the Party was unable to have a significant impact on federal policies.

Farmer-based parties, however, experienced greater success at the provincial level. The United Farmers of Alberta led the Alberta government from 1921 to 1935, while the United Farmers of Manitoba (which subsequently became the Progressive Party of Manitoba), won the 1922 election. While less successful in Saskatchewan, farm-based political parties elected several members to the Saskatchewan provincial legislature throughout the 1920s and 1930s. The influence of these parties on government policy led to the creation of Prairie Wheat Pools. (see below).

[Learn more about farmer-based prairie political parties]

Formation of Wheat Pools - Throughout the 1920s, the provincial governments of Alberta, Saskatchewan, and Manitoba oversaw the creation of Wheat Pools. The concept behind the Pools was the same as the Canadian Wheat Board: that farmers would benefit from pooling their wheat and having all sales handled through a central selling agency. The Pools also followed the example established by the Canadian Wheat Board in providing farmers with an initial payment. While membership was voluntary, by the end of the 1920s the three Pools were handling approximately 50 percent of Prairie wheat.

The Depression

During the Great Depression of the 1930s, the price of wheat fell to record lows. In the Prairie provinces, the impact of the Great Depression was worsened by a severe drought that lasted for most of the decade. The combination of the Depression and the drought was devastating to Prairie farmers, who were faced with low crop yields and reduced prices for the wheat they did have to sell.

The economic upheaval of the 1930s also resulted in financial disaster for the Wheat Pools. Overestimating the price of wheat for 1929 (the year of the stock market crash), the Pools were forced to take out major loans from the banks to pay farmers. However, as wheat prices continued falling throughout the 1930s, the Pools were unable to meet the loan payments. The Prairie provincial governments guaranteed bank loans to the Wheat Pools, and then turned to the federal government for assistance.

In 1935, the federal Conservative government, led by R.B. Bennett, took action, introducing legislation to create the Canadian Wheat Board.

The Structure of the Canadian Wheat Board

The corporate structure of the Canadian Wheat Board.  

In 1935, Canada passed the Canadian Wheat Board Act. Since its passage, the legislation has been amended several times. Additionally, the Act gives the Canadian Wheat Board greater potential powers, in terms of the types of grains and the specific provinces and geographical regions that it has jurisdiction over, than have been exercised to date. The following provides an overview of the main features of the Act, and how it is applied:
  • The Canadian Wheat Board enjoys a monopoly over the marketing of designated grains meant for human consumption, both domestically and for the export market, in designated areas.
  • While the Board currently maintains a marketing monopoly over wheat and barley, under the legislation its authority can be extended to cover other crops including oats, rye, flaxseed, rapeseed, and canola.
  • The Board’s monopoly covers the designated grains grown in the provinces of Alberta, Saskatchewan, Manitoba, and the Peace River district of British Columbia.
  • Under the legislation, the Board’s authority may be extended to cover designated grains grown in parts of Ontario and other sections of British Columbia.
  • Participation in the Wheat Board is mandatory. With the minor exception of domestic feed grains (which are not for human consumption), Western farmers must sell their wheat and barley to the Canadian Wheat Board.
  • For each crop year, the federal government guarantees to cover any financial losses incurred by the Canadian Wheat Board.
  • Any profits, however, are returned to the producers (farmers) who delivered grain to the Board during the crop year.


The legislation, further, outlines the Boards’ corporate structure:

  • The Board has a “shared governance” corporate structure, where responsibility for the management and operation of the Canadian Wheat Board is shared between the Board and the federal government.
  • There are 15 members on the Board of Directors. Ten members are directly elected by farmers. Each elected director represents a specific regional district, and serves a four-year term.
  • The remaining five members, including one member who serves as both President and Chief Executive Officer (CEO), are appointed by the federal Cabinet.
  • The Board of Directors is responsible for the day-to-day running of the Canadian Wheat Board.
  • However, the Act gives the federal government final authority over the direction and operation of the Canadian Wheat Board, stating that “The Governor in Council, may, by order, direct the Corporation with respect to the manner in which any of its operations, powers, and duties under this Act shall be conducted, exercised, or performed.”
  • The Board is required to file an annual financial plan with the Minister of Finance, and monthly reports disclosing grain purchases and sales.
  • The Board is also required to file an Annual Report with the federal Minister designated to be responsible for the Canadian Wheat Board, outlining the performance of the Board for that crop year; the report is then submitted to Parliament.

In the international arena, Canada has used the revised corporate structure as evidence the Canadian Wheat Board is essentially a “farmer-governed” organization. However, while it is true that farmers elect two-thirds of the Board of Directors, ultimately, the Canadian Wheat Board is legally responsible to Parliament.

Evolution of the Canadian Wheat Board

There have been several significant amendments to the structure of the Canadian Wheat Board as set out in the Canadian Wheat Board Act:

In 1943, the federal Parliament amends the legislation to make membership mandatory, instead of voluntary. This action is taken in conjunction with the federal government’s efforts to provide food aid during World War II. However, the mandatory requirement remains in place after the war.
In 1967, a subsequent amendment removes the five-year renewal clause, making the Canadian Wheat Board a permanent fixture.
In 1998, a further amendment significantly alters the corporate structure of the Board. Under Bill C-4, the Canadian Wheat Board is deemed no longer to be a “Crown Corporation,” but operates under a “shared governance” structure. The most visible sign of the change lies in the make-up of the Board of Directors, which formerly consisted solely of federal appointees.
The 1998 legislation signals an attempt by the federal government to address concerns that the Canadian Wheat Board is not responsive enough to farmers. However, it reaffirms the federal government’s authority over the Canadian Wheat Board, and introduces the reporting requirements to the Ministers of Finance and Agriculture.

How Effective is the Canadian Wheat Board?
Tables examining Canada’s wheat production and share of the international market

Historically, Canada has maintained approximately 20 percent of the worldwide wheat market. However, as the following tables illustrate, in recent years Canada’s share of the wheat export market has declined to approximately 17 percent. Furthermore, the actual quantity of wheat Canada produces has not increased over a 10-year period.

A Comparison of world wheat-market shares among the top 5 exporting countries or regions

Wheat

Source: Agriculture and Agri-Food Canada

 Total Amount of Wheat and Wheat Flour Exported, Canada (in thousand tonnes)

Year

Total Amount Exported

Percentage of Worldwide Total

1994-95

20,771

20.5

1995-96

16,198

16.3

1996-97

19,366

18.6

1997-98

19,996

19.1

1998-99

14,723

14.4

1999-2000

18,313

16.3

2000-01

17,108

16.4

2001-02

16,214

14.6

2002-03

9,191

8.4

2003-04

15,727

14.9

Source: Canadian Wheat Board

Wheat Production in Canada and the United States Over a 10-year Period (in thousand tonnes)

Year

Canada

United States

1994

22,920

63,167

1995

24,989

59,404

1996

29,801

61,980

1997

24,280

67,534

1998

24,082

69,327

1999

26,960

62,475

2000

26,536

60,641

2001

20,630

53,001

2002

16,198

43,705

2003

23,552

63,814

Source: Canadian Wheat Board

Internal Pressures on the Canadian Wheat Board

Do Western farmers need the Canadian Wheat Board?

The Canadian Wheat Board has its critics. Despite the fact that farmers were the driving force behind its creation, organizations representing groups of farmers are actively lobbying for significant changes to, or the outright abolition of, the Wheat Board.

These groups have voiced a number of concerns over the Board’s structure and operation:

Monopoly over the marketing of grain

Some argue that the original concept behind the Canadian Wheat Board, that a single organization will have more power negotiating contracts for the sale of grain than individual farmers, no longer holds true. Changes in technology mean that farmers can use computers to obtain up-to-the-minute data on grain prices. Under a more open system, farmers (or groups of farmers) could then use this data to obtain the best possible price for their grain, whether by selling it to buyers over the Internet, transporting it across the border to sell to US markets, or through some other method. 

Others have argued, however, that the ability to obtain the most recent data on wheat and barley prices does not necessarily give farmers the skills required to sell these grains in a competitive marketplace.

Does Canada Really Have a Monopoly?

Furthermore, some argue that Canada’s ability to obtain the best possible price for farmers in the international market is limited. While Canada has a monopoly over the marketing of the majority of wheat that is commercially grown in Canada, it does not have a worldwide monopoly over wheat sales. Canada accounts for less than 20 percent of the worldwide wheat export market, which means that it must compete with other sellers when setting prices. Setting prices too high will reduce sales.

The Canadian Wheat Board’s position is that while Canada does not have a monopoly over worldwide wheat exports, Western Canada’s wheat and barley are respected around the world for their superior quality. Therefore, having a monopoly over the selling of these two grains, and not having to compete with other sellers, helps the Canadian Wheat Board obtain the best possible price for farmers. Furthermore, combined with “Single Desk Selling,” a monopoly allows the CWB to price differently to different markets on any given day. This allows the Board to sell wheat to one customer at a lower price (in order to secure a sale), without being threatened with the loss of “premium markets” that are charged a higher price.

Voluntary versus Mandatory Participation in the Canadian Wheat Board: “Buy-back” Licenses

A particularly sore point with many farmers involves the issue of “buy-back” licences. A farmer wishing to sell his wheat or barley to a third party (for example, by transporting his grain across the border to take advantage of higher prices in the United States) must first deliver the grain to the Canadian Wheat Board and buy it back again. The price charged for the farmer to purchase the grain (the price that the Canadian Wheat Board would charge to sellers on that particular day) essentially removes any advantage that would be gained from selling it to a third party. Furthermore, Canadian Wheat Board officials are free to refuse the farmer’s request for a buy-back license.

The Canadian Wheat Board’s position is that buy-back licenses are consistent with the philosophy of price pooling, whereby all farmers who deliver wheat during the crop year share in the profits. Requiring farmers to purchase a buy-back license allows other farmers to share in the proceeds from the sale. 

Price Pooling

Some argue that the system of price pooling, like any bureaucratic system, inevitably leads to a time lag between receiving information about market conditions and acting on that information, both at the micro and macro level. At the micro level, since they are receiving the pooled price for their grain and not the market price, farmers may be slow to respond to changes in demand. In the 1994/95 crop year, the CWB was unable to undertake a potentially lucrative contract to supply Japan with barley, as it could not attract enough barley into the pool to fill the contract. At the macro level, it can lead to poor marketing decisions, such as selling grain to the export market when it would have received a higher price on the domestic market, and vice versa.

The Canadian Wheat Board’s position is that any financial losses that may have been experienced in specific cases are minor compared to the overall financial benefits to farmers of the system of price pooling and single desk selling.

Alternatives to the Canadian Wheat Board – An Open System or Dual Marketing?

Some critics of the Canadian Wheat Board call for a completely open system, in which wheat and other grains are bought and sold on the open market. Others favour a “dual marketing” system, where farmers could choose between selling their wheat independently and participating in the Canadian Wheat Board. The Canadian Wheat Board’s position is that, as with any other monopoly, being the sole provider of Western wheat gives it greater clout in negotiating the best possible price for the product. Furthermore, the system of “price pooling,” whereby all farmers share equally in the risk, could not continue if the CWB was in direct competition with other grain sellers. Therefore, a dual market is neither practical nor in farmers’ best interests.

Supporters of dual marketing point out, however, that a type of dual market operated successfully in the 1920s, when approximately one-half of Prairie farmers participated in provincially run Wheat Pools, while the remainder marketed their own grain. Furthermore, they argue that a dual marketing system exists in Ontario, where farmers have a choice between selling their wheat themselves, or through the Ontario Wheat Producers’ Marketing Board. The Canadian Wheat Board acknowledges that Ontario farmers have more flexibility in choosing how to market their wheat, but point out this does not necessarily lead to higher profits.

Do Farmers Support the Canadian Wheat Board?

In recent years, several polls have been conducted to gauge the level of support for the Canadian Wheat Board among farmers. The results illustrate the lack of a clear consensus among farmers as to the future direction of wheat marketing in Canada:

  • A 1997 non-binding referendum, conducted by the Canadian Wheat Board, found that 63 percent of barley farmers preferred a single market for barley, while 37 percent preferred an open market.
  • A 2003 poll conducted by Ipsos-Reid found that 64 percent of Alberta wheat growers would like to see changes to the way their wheat is currently marketed.
  • The same poll found that 68 percent of Alberta barley growers would like to see changes to the way their barley is currently marketed.
  • A 2005 poll conducted by Ipsos-Reid found that 48 percent of wheat farmers preferred the current “single desk” market for wheat, while 46 percent supported the implementation of a “dual market.”
  • The same poll found that, in the absence of a dual market, 64 percent of wheat farmers preferred the current system over a completely open market.
  • With respect to barley farmers, the 2005 poll found that 56 percent of barley farmers preferred a dual market, while 32 percent supported the “single desk” market.
  • In the absence of a dual market, the same poll found that 53 percent of barley farmers prefer an open system without the Canadian Wheat Board.

External Pressures on the Canadian Wheat Board

Pressure from international trade organizations may eventually force change upon the Canadian Wheat Board

Under international trade law, the Canadian Wheat Board is categorized as a State Trading Enterprise (STE). The dictionary defines a State Trading Enterprise as “An enterprise authorized to engage in trade that is owned, sanctioned, or otherwise supported by the government.” The operation of the Canadian Wheat Board is bound by rules regarding STEs that are found in both the North American Free Trade Agreement (NAFTA) and the rules of trade governing member states of the World Trade Organization (WTO). In recent years, the operation of the Canadian Wheat Board has been challenged on both these fronts.

NAFTA

While media attention has focused primarily on the softwood lumber dispute, another ongoing trade dispute between Canada and the United States concerns Canadian wheat and barley exports to the US market. The US claims that Canada is dumping wheat onto the United States market at prices below market value. (“Dumping” is an economic term referring to a situation whereby a product is exported and marketed at an unreasonably low price, in order to undercut the competition). Furthermore, the US claims the Canadian Wheat Board is able to do so because it is unfairly subsidized by the Canadian federal government.

Between 1990 and 2002, the United States launched a total of ten trade challenges against Canada. Canada vigorously fought the charges, arguing that the Canadian Wheat Board is a farmer-governed organization, and therefore committed to ensuring that the farmers it represents receive the highest possible price for their wheat and barley.

In 2003, after Canada won the majority of the trade challenges, the United States Department of Commerce (DOC) imposed a series of tariffs on Canadian wheat (Canada appealed, and the tariffs were eventually either reduced or dropped). At the same time, the US government announced a four-point action plan against the Canadian Wheat Board. A key component of this plan involved advocating for changes to the rules regarding monopoly State Trading Enterprises (such as the Canadian Wheat Board) at the World Trade Organization agricultural negotiations.

The WTO Agricultural Negotiations – the Doha Round

The World Trade Organization (WTO) is an international organization set up by member states to reach a consensus on international rules of trade. Since 1993, there have been an ongoing series of negotiations on agricultural trade.

In 2005, the current round of agricultural negotiations, called the Doha round, is scheduled to end in 2006. A framework agreement, outlining the major goals to be pursued for this round, was reached in August 2004. Member governments hope to establish a set of final targets or “modalities” at a December 2005 Ministerial Meeting.

Canada is not a participant in the negotiations, but is working actively behind the scenes. The Canadian Wheat Board supports the commitment to reduce trade distortions in certain areas, such as limiting a country’s ability to use food aid programs to dispose of surplus grain or develop commercial markets. However, it strongly opposes the section of the agreement concerning STEs. The specific section that Canada finds objectionable commits WTO members to: “[the] elimination of trade distorting practices with respect to exporting state trade enterprises (STEs), including eliminating export subsidies provided to or by them, government financing and the underwriting of losses. The issue of the future use of monopoly powers will be subject to future negotiation.”

The Canadian Wheat Board’s position is that the support it receives from the Canadian government – through guarantees of an initial payment, underwriting losses, and protection against payment defaults by creditors – is not an “export subsidy.” Further to that, the WTO is unfairly singling out STEs by characterizing the government support they receive in this manner. The Canadian Wheat Board believes the process is being driven by the United States (albeit with the support of the European Union). Finally, the CWB is concerned about the implications of the commitment to future negotiations on monopoly powers. It is possible the Canadian Wheat Board’s monopoly over wheat and barley may be placed “on the table” at a future date.

Ultimately, if this section remains in the final agreement, it directly threatens the very foundations of the Canadian Wheat Board: “single desk selling,” “price pooling,” and guaranteed support from the federal government.

Links and Further Information

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Legislation

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