Canada & USA: Focus on impact of CWB’s changing function on the US farmers

The Canadian Wheat Board has not been eliminated, but its function has changed and that could have a big impact on growers in the United States, Farm & Ranch Guide reported on March, 22.

North Dakota, northwestern Minnesota and northeastern Montana will likely be affected most by the changing function of the Canadian Wheat Board (CWB), because agricultural practices in this region are so similar to those of the southern regions of Canada, according to Frayne Olson, NDSU Extension grain marketing specialist. These changes are being driven by the "Marketing Freedom for Grain Farmers Act" that was passed just before Christmas by the Canadian Parliament. Although this legislation didn't eliminate the CWB, Olson expects there will be changes; some will be beneficial to U.S. growers, while others might favor Canadian producers.

When first formed in 1943 the CWB's prime function was to be a monopoly buyer and seller of milling quality wheat, durum and barley- both feed and malting. The board also operated a pool pricing system, according to Olson, so a farmer selling their grain to the CWB would receive an average price for whatever the CWB is able to re-sell that grain for. The Canadian government has also played a role in the CWB operation, since it guarantees and actually helps with the financing. This is necessary because the CWB itself doesn't own a large amount of physical assets, with the exception of some rail cars and their office building and equipment. The CWB doesn't own any elevators. However, over the past years the CWB has been involved in what Olson terms "ancillary functions", and this is where a lot of the questions come in regarding the transitioning role of the CWB. Some of those ancillary functions include the allocation of rail cars to elevators and helping to determine grain quality standards in Canada. The CWB also maintained a list of accepted varieties that could be marketed through its channels. In the case of wheat, according to Olson, this allowed only one U.S. developed wheat variety, Glenn, to be marketed through the CWB.

"The recently passed Marketing Freedom for Grain Farmers Act changed the function of the Canadian Wheat Board, but it did not eliminate the Canadian Wheat Board," Olson explained. "The Wheat Board still exists, but its function changed substantially. It is now a voluntary organization, not a mandatory one."

Basically, under the new law, Canadian farmers will now be allowed to sell directly to private companies for grain delivered after Aug. 1, 2012. Grain produced in 2011 will be marketed under the traditional CWB program.

"The big challenge the CWB now has is "what are we going to do? What are we going to look like?"" Olson said. "Right now, under the current legislation, the CWB can decide to market any crop they want."

For the next five years the Canadian government will continue to finance the CWB and during that time the group will need to develop their new identity and mission, Olson said. He also expects there will be a great deal of pressure to allow Canadian farmers to grow more U.S.-developed wheat and barley varieties.

The ultimate outcome Olson said he's been asked by many concerned farmers if the changes at the CWB will allow a flood of grain to enter the United States, but, in his opinion, that won't happen. Currently there are different grading and variety standards within the grain industry of the two countries. The differences are not huge, he noted, but the differences exist nonetheless. One of the biggest differences is the cleaning charge currently placed on Canadian wheat going to export channels, where the grain needs to be cleaned to a much higher level than it does in the United States. Olson believes U.S. grain companies will contract for Canadian production. Right now there are some wheat and barley exports from Canada into the U.S. Likewise, Canadian companies will likely contract production in the U.S. Currently that is happening for other grains, but not for wheat and barley. He is also convinced that more timely information will be coming from the Canadian side in regard to how many acres are being planted, crop conditions, and protein contents.

Even though the revised structure of the CWB will impact mainly spring wheat and barley producers, soybean growers will also be influenced by this action. Olson foresees a healthy competition for acres in Canada to continue, especially for spring wheat and canola.

"If wheat prices in Canada become more competitive, what will that do to canola acres and prices?" Olson asked. He thinks that would likely increase the price of canola in Canada and ultimately the U.S. and thereby impact soybean prices.

"So far soybeans have been pushing canola acres further north, but will we see canola start pushing back?" he asked. "We will have to wait and see."

That is just one area where a wait and see attitude will be necessary as the Canadian Wheat Board goes through its transition period and discovers its new identity under the new legislation.