April 1, 2014 - No. 35
Consequences of Harper
Wrecking of Canadian Wheat Board
No to Nation-Wrecking! Public Right
Yes! Monopoly Right No!
Wrecking of Canadian Wheat Board
• Public Meeting in the Heart of Grain Country
Sends Message to Ottawa
• Grain Shipping Bill Diverts from Destruction
of Public Monopoly as Source of Chaos
• Grain Companies Profiting from Marketing Chaos
- Canadian Wheat Board Alliance
• Farmers Bear Enormous Costs from Agriculture
Minister's Failure to Plan - National Farmers Union
• Grain Farmers Paying the Price for
Post-Single Desk Logistics Failure - National Farmers Union
Consequences of Harper Government's
Wrecking of Canadian Wheat Board
Public Meeting in the Heart of Grain Country Sends
Message to Ottawa
Meeting of prairie grain
farmers, Raymore, Saskatchewan, March 9, 2014.
The Canadian Wheat Board Alliance hosted a large meeting
of prairie grain farmers March 9 in Raymore, Saskatchewan. By an
almost unanimous vote the meeting passed a motion demanding the Federal
Minister of Agriculture immediately conduct a vote on the restoration
of the farmer-controlled single desk
Long-time Saskatchewan MP Ralph Goodale addressed the
meeting and observed that the prairie price of all grains had declined
by almost 50 per cent and this amounted to an estimated loss of $5
billion dollars to the western farm economy. One audience member
angrily pointed out "we can't afford another
year of this!"
Stewart Wells, a former farmer-elected Director on the
Wheat Board, explained to the meeting that with the single desk farmers
got 85 per cent of the port price for grain while the latest
that although international grain prices remain high, the grain
companies and railways have reduced western farmers'
share to less than 40 per cent.
Kyle Korneychuk, spokesperson for the CWBA, said,
"Farmers have now seen in their bank accounts and grain bins how the
Ritz system of grain marketing works. I think that is the reason they
gave such a firm message to Ottawa and the Opposition politicians
attending the meeting that they want to exercise
their right to vote on the marketing system they have to live with."
Liberal Ralph Goodale, along
with the NDP Official
Opposition's Agriculture and Deputy Agriculture Critics Malcolm Allen
and Ruth Ellen Brosseau got the message loud and clear during the
meeting that farmers wanted a vote now.
"Local MP Andrew Scheer did not respond to our
invitation, however both Goodale and Allen promised to take the message
that farmers want a vote on the single desk back to Ottawa" said
Korneychuk. Allen observed that "more and more farmers are coming to
see the private grain trade as the problem and
the single desk as the solution and they want a vote now. We will do
our job and take that message back to Ottawa."
Korneychuk went on to say, "I was pleased to see Ms.
Brosseau, who hails from rural Quebec, taking such an interest in
western problems. She clearly indicated to me that she understood that
the single desk Wheat Board was as important to western Canada as
supply management is to Ontario and Quebec dairy
Korneychuk concluded that the meeting was sending a
clear message to Ottawa. "If Ottawa can step in and seize the assets we
built up in the farmer-controlled Wheat Board without compensation and
issue orders to the railways with threats of draconian fines to back
them up, as they did on Friday, there is no
reason they cannot honour a democratic vote by farmers to re-instate
their farmer-controlled single desk Wheat Board. Farmers want a fair
Whereas the pre-2011 Canadian Wheat Board played a key
role in coordinating grain shipments, and
Whereas the single desk selling advantages of the
pre-2011 CWB returned 85% of sales values to farmers' pockets, as
opposed to the 40 to 50% returned from the private trade at present,
Be it resolved that this meeting go on record asking the
federal government to immediately conduct a vote of farmers regarding
single desk selling of western wheat and barley.
Grain Shipping Bill Diverts from Destruction of Public
Monopoly as Source of Chaos
On March 26, Agriculture Minister Gerry Ritz and
Transport Minister Lisa Raitt tabled Bill C-30, An Act to amend
the Canada Grain Act and the Canada Transportation Act and to provide
for other measures, known by its short title as the Fair Rail
for Grain Farmers Act.
As has become
the method for governments that champion an anti-social agenda, the
name of the bill purports
to uphold high ideals to deliberately mislead the public as to
the actual content of the bill. The title and content of the bill claim
that it is the rail monopolies that have caused the backlog in grain
their unfair treatment of grain farmers, and now,
lo and behold the Harper will swoop in to defend the farmers. Of
course, nothing could be further from the truth. At best, the logic
presents is akin to saying that the cause of poverty is lack of money
facile explanation meant to dismiss or frustrate those who are actually
trying to sort out the problems they face in
The bill's proposed changes include the setting of
requirements for grain shipments by Canadian National Railway and
Canadian Pacific Railway and enshrining penalties of $100,000 per day
for non-compliance -- these fines were introduced earlier in March
through an emergency directive issued
by the federal government. The bill also proposes to have the Canadian
Grain Commission regulate how much a grain company will pay farmers
if the company does not meet the contracted delivery dates.
Another proposed change is to increase inter-switching limits from
30 km to 160 km. This would
permit farmers to use rail companies up to 160 km away to ship
Farmers' organizations point out that the potential for
backlog in grain shipments should have been on the government's radar
months ago. This year's grain harvest in Western Canada was 76 million
tonnes, 50 per cent higher than average. Besides the government's
refusal to take timely action, farmers'
organizations have been pointing out that the source of chaos in grain
shipments is not
the rail companies, but the Harper dictatorship's
destruction of the Canadian Wheat Board's (CWB) public monopoly that,
amongst other things, kept both the rail and grain monopolies in check.
Ken Larsen of the Canadian Wheat Board Alliance wrote on
"The Ritz/Raitt command to the railways to move a
million tonnes of
grain a week or else is full of irony. It will not change the fact the
prairie crop has been stranded which has pushed farm prices down by
half. It was perfectly predicable and the government was certainly
"Since there will also be a huge carryover of old crop
into the new
crop year that also means prices for western farmers will not recover
for a long time unless there is a massive crop failure in the near
future. This mess is the consequence of Agriculture Minister Ritz and
his Prime Minister's reckless and thoughtless
destruction of the CWB.
"Certainly there were logistical problems under the
controlled CWB, however the farmer controlled CWB identified the root
problem and decisively fixed it in 1998 when they successfully sued
those responsible and tuned up the system for the next ten years.
"As the March 8, 2014 Regina Leader-Post
reports, Ottawa is not even enforcing its own laws:
"'Among the last reports prepared by a still-independent
Wheat Board was the second study by rail analyst John Edsforth, both of
which pointed out that Prairie farmers were overpaying by as much as
$275 million a year to transport their crops, compared to what is
considered fair under the federal
grain transportation law. The government response was to kill the
wheat board.' Emphasis added
"Without some organization with the legislated power to
transportation logistics as the farmer controlled CWB did so well, this
problem will not be solved, even by orders carved in stone tablets and
brought down from the Prime Minister's office by his Cabinet.
"Ottawa does not want to recognize that the grain
companies are the proximate cause
of all this. As yesterday's blog and many other articles and sources
demonstrate, it is the grain companies who now get the lion's share of
the money farmers once got for their grain. In fact, farmers now get
than 40% of the grain cheque and the railways and grain companies are
now taking the other 60%.
"The numbers from the farmer controlled CWB confirm just
the grain robbery this past couple of years has been. For example,
consider the CWB annual report on the 2009/10 crop year when farmers
ran the show.
"Gross revenue of $5.1 billion, minus the $630 million
paid to the
grain companies and railways to move the grain, leaving farmers with
$4.3 billion, or 84% of the grain cheque.
"At 84% back to farmers I think we are very safe to say
that the bar
set by the farmer-run CWB sure beats the 40% farmers are now getting.
"So irony rules the day in Ottawa. We have a Federal
claimed farmers working together offended their dogma about markets and
killed the Wheat Board.
"Yet now they have gone to a command and control dictat
ordering what amounts to a not quite innocent third party (it really
hurts to say that of the rail ways) to fix a problem created by the
Federal Government allowing the grain companies to do what they want to
"In the end this order from Ottawa will not put an extra
farmers' pockets. That ship, as they say, has sailed until we get the
single desk back."
Grain Companies Profiting from Marketing Chaos
The Canadian Wheat Board Alliance (CWBA) has released a
one page summary [see below] exposing how the private grain trade and
government are misleading the public on who is responsible for the
chaos at Canada's grain ports.
"We followed the money" explained Kyle Korneychuk,
spokesperson for the CWBA, a prairie wide farm group. "Our calculations
demonstrate the grain companies have taken over $1.6 billion in excess
profits from wheat alone so far this crop year."
Using data from Ottawa-created grain broker Canadian
Wheat and Barley as well as posted tariff rates and grain export
volumes to the end of January from the Canadian Grain Commission and
the Canadian Transportation Agency, the CWBA fact sheet shows the
private grain companies are using the system
to make record profits at the expense of farmers.
"Mr. Harper's threats to the railways are a smoke
screen. In fact the farmers' share of the international price of grain
has gone down from 84% under our singledesk Canadian Wheat Board to
around 40% today. It is the grain companies who have taken the lion's
share (about $170/metric tonne) of the international
price at the west coast because the railways are constrained by
legislation from taking much more than 12%," Korneychuk observed.
Korneychuk noted "farmers are being hit by the grain
companies twice. First they are not getting their share of the
international grain price and now that rumours are floating around that
Canadian grain will start to move in greater volumes, the futures price
is going down which will be another excuse to pay
Korneychuk heaped contempt on the announcement of fines
for the railways saying the penalties of $100,000 a day "mean nothing"
to a company like CP, whose CEO Hunter Harrison is the highest paid
executive in Canada, earning $49.1 million in salary, stock options and
bonuses in 2012. "It's chump change. Harrison makes about $180,000 per
day, so he could pay that $100,000 a day fine personally."
Korneychuk concluded "Ottawa and others are attempting
to make a fairly simple situation appear complicated. When you follow
the money it is painfully evident the Harper government is responsible
for allowing the private grain trade to steal billions of dollars from
farmers. Farmers have a right to vote on
the marketing system they must pay for and the time for that vote is
Quick Facts: The Grain Marketing Chaos 2014
"A bushel of wheat is offered at Vancouver for CAD
$11.38/bushel and bought in the country for CAD $4.69/bushel for a
difference of CAD $6.69/bushel. In metric tonnes, the price at
Vancouver (port) is $246 CAD/tonne above the average country
price for #2 CWRS 13.5..." - February 26, 2014 CWB Market Research
Farmers are now getting about 41% of the grain cheque.
The grain companies are taking 48% -- making the largest
profits in their history.
With our Wheat Board farmers got 84% or more of the
Follow the money: The railways, primary elevators and
terminals are guaranteed a profit by "regulated tariffs" which allow
them to take a total of $77 per metric tonne (less in Alberta, more in
Manitoba depending on rail cost).
Regulated tariffs apply to grain movement in-country.
Once grain is in the terminal it is the private property of the grain
company and that is where the excess profits are made.
Our calculation uses tariffs set by the Canadian Grain
Commission and Canadian Transportation Agency for wheat:
- port price at Vancouver is $417/metric tonne (mt)
- minus farmers' price in-country $171/mt
- leaves $246/mt for the grain companies and railways
Now subtract the following:
||-$40.00 (varies with
distance to port)
regulated profit for getting grain to port
|$246 minus $77.07 equals $168.93/mt
THEREFORE: $168.93 per metric tonne is being scooped up
by the grain companies as the excess profit they make purchasing wheat
and durum from farmers in-country and flipping it to their customers at
According to the Canadian Grain Commission total exports
of wheat and durum as of Jan 26/14 are 9,697,210 mt.
Multiply that by the excess profit and we see the grain
made $1,638,149,685.30 (over $1.6 billion on wheat
alone) as of January 26, 2014 because the single-desk CWB is gone.
This money would have been returned to farmers by the
single-desk Canadian Wheat Board.
Farmers Bear Enormous Costs from Agriculture Minister's
Failure to Plan
Although grain movement has been down since the
beginning of November, 2013, Minister Ritz and Minister Raitt announced
that railways would be required to double the grain volumes currently
being shipped just as those companies were ready to gear up anyway.
Ian McCreary, former CWB director and National Farmers
Union (NFU) member, asked "Why now? Why wait four months to announce
concrete actions that could have been taken much earlier?"
The railways will have four weeks to ramp up to ship a
combined total of 1,000,000 metric tonnes a week or be penalized up to
$100,000 per day for non-compliance.
McCreary describes the problems with grain
transportation as a big picture issue. "The fact is that with no
organization to hold the railways accountable for service levels, the
companies provided the amount of service that was convenient for them."
The transportation chaos is exactly what McCreary warned
the Conservative government about on November 2, 2011, at the
legislative committee on Bill C-18. He clearly explained that without
mechanisms to: "allocate the constrained capacity of the west coast
handling facility in an economic way that allowed
the optimal customers to be transferred to the other port , everyone is
going to want to push through the west coast. You will have tremendous
economic pressure on the west coast."
McCreary further predicted what would happen to grain
prices when port capacity became overburdened, saying, " When the
export embargo by the Soviet Union  was in place, what happened
to the cost of moving grain through U.S. west coast terminals? For
those who watch markets, the difference
between a rail offer and a port offer on dark northern spring wheat
following the introduction of the freight embargo was $3 a
bushel...That's right. It was $100 a tonne."
It turns out that McCreary was equally correct in
predicting the direction of the price differential between elevator and
port. The CWB reported on February 26, 2014 that farmers are receiving
an average of $4.69/bushel for wheat, and wheat at Vancouver port has a
price of 11.38/bushel. Thus, grain companies
received $6.69 per bushel ($245 per metric tonne). Elevator company
costs (freight and elevation) are about $70 per metric tonne, leaving
the elevator with about $175 per metric tonne. By year-end, demurrage [additional charges paid to ship owners for
use of a vessel beyond the contracted period -- TML Ed. Note] is
estimated to approach $100 million -- the highest that Canada has ever
paid. However, those demurrage
costs would be fully paid for with the first 569,000 metric tonnes
shipped, which is less than one week's grain movement.
Ken Larsen, Director of the Canadian Wheat Board
Alliance, pointed out that when Minister Ritz was questioned about
being warned about this crisis two years earlier, Ritz answered, "We
saw this coming" - referring to his ‘Crop Logistics Working Group'.
"For a Minister and his advisors to have seen this coming
and to have done nothing until now is egregious mismanagement," said
Larsen. "Rail transportation on the Canadian prairies doesn't work
without healthy government oversight, and that lack of oversight is
sinking farmers more deeply in debt."
According to Larsen, this isn't the first time farmers
have faced delays in getting grain to port and loaded onto ships. "In
1997/98, the newly elected farmer-directors of the CWB were confronted
with poor grain movement at a cost of $18.7 million in demurrage in
1996/97," he stated. "That time, the railways
pleaded that there was snow in the mountains."
Larsen continued, "The CWB launched a level of service
complaint with the Transport Commission and won, then sued both CN and
CP for poor performance. CN threw in the towel and paid an undisclosed
sum and CP lost its case and had to pay $15 million to the CWB."
"In the following year (1998/99), however, the CWB
collected $6.6 million in despatch (net after demurrage was paid) from
ship owners because ships were loaded more quickly than anticipated.
Because the CWB had no retained earnings, those despatch dollars were
always returned directly to farmers. The previous
year (1997/98) net despatch earnings were $4.465 million. This trend of
earning dispatch for farmers' benefit continued until Ritz killed the
CWB," Larsen commented.
"Now farmers are bearing the costs of Ritz's lack of
planning to transition the Canadian Wheat Board's grain transportation
coordinating function to another body. No one is in place to make sure
that grain is transported to port and available for ships to load in an
efficient and orderly way," noted McCreary.
"This is a preventable failure, and it's costing prairie farmers
Grain Farmers Paying the Price for Post-Single Desk
Farmers should not expect prices to go up, or more grain
to be moved, anytime soon, as Agriculture Minister Gerry Ritz is only
calling for more numbers, reports and discussions among railways,
elevator companies and grain companies while farmers' costs mount and
prices tank as a result of Canada's wrecked
grain transportation system. "More people taking notes will do nothing
to make up for the lack of an authority to co-ordinate the shipment of
grain by rail to ports," said NFU board member and Saskatchewan grain
farmer, Glenn Tait. "This is a service the CWB used to provide for the
benefit of farmers."
As the largest shipper of
grain in Canada, the
farmer-controlled CWB was able to coordinate grain shipments by rail
according to customer demand, elevator and terminal capacity, and
shipping requirements. Now that the private trade is controlling the
export system, there has been a backlog of 30 or more vessels
waiting at anchor since before Christmas. Ships often must shuttle in
and out of terminal berths to load partial cargos, with each ship
charging in the neighbourhood of $10,000 per day in demurrage fees to
cover the wages, fuel, food and the cost of being idle when they could
be shipping other valuable products.
Tait stated, "As a result of the disorganization at the port, rail cars
are being used as storage, not for transportation and farmers are
paying the cost."
"The elevator companies will recoup demurrage charges
from farmers by deducting this cost from grain prices. When the CWB
looked after logistical matters, freight costs from the prairies to
western ports were in the $50 per tonne range. Today, we are seeing
costs of $100 per tonne or more deducted," Tait
continued. "The total losses from demurrage alone so far are in the
millions of dollars -- money that will never be spent by prairie
farmers, or anywhere within the Canadian economy."
The base price of wheat has fallen to around $4.00 a
bushel from over $7.00 a year ago -- for the same quality of product.
This 40% nominal drop in grain prices is understated and has been
masked by an almost 10% decline in the value of the Canadian dollar in
the past year. In some areas, elevators are not
even taking delivery -- an effective price of zero.
"Many farmers who have contracts are unable to ship
grain through no fault of their own -- yet they are the ones paying the
late delivery charges," said Jan Slomp, NFU President. "The price gap
between what farmers get at the country elevator and what grain
companies get when they sell the grain is widening.
The railways, elevators and shipping companies are pocketing the
difference, in the millions of dollars."
"The farmer-controlled CWB
worked with industry and
government to co-ordinate and promote trade and transportation. It won
important victories on behalf of farmers for better rail service and
better rail rates," said Ken Larsen, NFU member and Alberta grain
farmer. "Blaming the railways or grain handlers
is like blaming coyotes for eating mice. By ending the CWB's single
desk authority, it was Ritz that turned the coyotes loose."
"Will farmers have to cap production at 75% of this
year's yield because that is all the private trade is capable of moving
through ports in any given year? Investing in improved genetics and
agronomics or creating fake markets by signing new trade deals will do
nothing to solve the logistical problems of moving
our grain to the ocean efficiently," observed Tait.
"The current disastrous state of grain transportation is
just another example of government bungling that lets corporations
extract more money from farmers," Slomp concluded. "We know that
without oversight there will be a bottleneck every year. Millions of
tonnes of grain are harvested every fall and must
be moved to market. We need a coordinating authority that has the teeth
to discipline the grain transportation system. Otherwise we risk losing
Canada's capacity to be anything other than a third-rate supplier of
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