The closure of the Port of Churchill and the fate of Manitoba’s northern rail line is not an accident due to economic circumstance: it was the inevitable result of eliminating the single-desk monopoly of the Canadian Wheat Board.
There were ample warnings raised about what would happen if the Conservative government of Stephen Harper scrapped the wheat board. The threats to the northern rail line and the port were clear, and it wasn’t just farmers and politicians raising red flags. The Winnipeg Chamber of Commerce
had concerns about the economic effect on Winnipeg — losses of more than 2,000 jobs.
There will be arguments the rail line and the port are failing because they were not economically viable. In fact, it is cheaper for farmers in the eastern Prairies who want to ship their grain to do so through Churchill. Grain companies ship through their own terminals in Vancouver and Thunder Bay, Ont., where they can make more money — and farmers make less.
The power relationship among producers, rail and grain companies is the same as it ever was, as is the basic geography. There are two major railways, four global grain companies and thousands of farmers. The reason for the wheat board’s creation in the first place was so farmers could pool their bargaining power, and especially so that smaller players could compete on a global marketplace.
The board was a single entity looking out for farmers’ interests, and it had the power to do so in three basic ways.
First, it encouraged farmers to deliver a premium product, which established a global reputation of quality for Canada’s wheat, meaning customers would pay a higher price. Second, it played a role in co-ordination and logistics, getting grain to port by rail.
Finally, because it was a single desk representing all western Canadian farmers, it had the clout to overcome the bottlenecks individual farmers would face with railways and grain companies.
From 2007 to 2010, farmers earned from 90 per cent to 93 per cent of the world price at port. After the wheat board lost its single-desk power, producers’ share of the world price dropped.
Farmers in Manitoba’s Swan River Valley alone lost an estimated $50 million for the 2013-14 crop year.
Despite record high prices, railways were leaving a bumper crop sitting on the Prairies; even fines of $100,000 a day levied by the Conservative government couldn’t persuade them to shift it.
To whom are farmers losing? For the most part, grain companies. The international grain market itself is different than most others: there are only four companies, mostly private and family-owned.
The loss of the wheat board appears to have been a multibillion-dollar transfer of income and wealth by the Conservative government to grain companies, and, to a smaller degree, railway shareholders. The losers are farmers and rural communities, and taxpayers, who have to now have to make up losses.
Grain farmers never voted to get rid of the wheat board single desk. There were issues in the 1990s, when people chafed under inflexible rules, which resulted in reforms. It’s a myth anyone was ever arrested for selling wheat. Some farmers were jailed for taking their trucks out of customs impound. Try driving a seized vehicle from customs at the border today and see what happens.
Throughout their 10 years in power, the Conservatives tried to get rid of the board by putting their thumb on the scale, especially in wheat board elections. A review of the wheat board included the provinces of Alberta and Saskatchewan, and excluded Manitoba. Board members who favoured the single desk were gagged by government; there were efforts to strip small farmers off the voters’ list; multiple ballots were sent out so some farmers could vote more than once; a referendum was held with three muddy options, and unlimited third-party spending was allowed.
Despite all this, farmers voted consistently to keep the wheat board until the Conservatives scrapped it after winning a majority in 2011. It was sold — perhaps given away; it’s not clear — to agrifood company Bunge Ltd. and Saudi Arabia in 2015.
The trouble for the Port of Churchill and the northern rail line, stalled grain shipments and billions in lost revenue for farmers are all clearly predicted results of scrapping the single desk. It is a crisis caused by government policy. It should go without saying it can be resolved by changing government policy. The question is how bad things have to get to generate a critical mass to create a consensus for change.
Loss of Canadian Wheat Board behind Churchill failure - Winnipeg Free Press (external - login to view)