Farmers for economic freedom
Updates from the Prairie Centre/Centre for Prairie Agriculture in
web posted January 22, 2001
For the record...
By Craig Docksteader
It was October 2nd, 2000 when the email arrived at the Prairie Centre. Although somewhat chippy, the note could have passed for a sincere inquiry about the nature and work of the organization. It read as follows:
"I am thinking of becoming a member of the Prairie Centre. I have read many of your well crafted stories in our local paper and would like to know more about your organization. Could you send me a copy of your bylaws. It would also be nice to have an outline of your democratic structure. Could you also send me your audited financial reports and a list of financial contributors."
"I am also interested in how your members formulate policy. Do you have annual policy meetings? Are members allowed to attend Board meetings? Since you are such a strong defender of democracy and accountability, I am sure you will agree that in order to make an informed decision about whether I should support the Prairie Centre I should have access to the above information."
While sincere inquiries into the structure and activities of the Prairie Centre are always welcome, this one was clearly disingenuous. The writer is well-known for his defense of a mandatory wheat marketing monopoly, and would not have been in the least bit interested in supporting the Prairie Centre.
Within weeks after the Prairie Centre candidly replied to the query and provided much of the requested information, the writer and a colleague of his began to circulate letters to weekly newspapers bashing the Prairie Centre.
We weren't surprised. It comes with the territory and usually means you're being effective in promoting change. Why else would those who defend the status quo go to such an extent to thwart your efforts?
For the record, here's some of what the letters suggested, inferred, or claimed outright about the Prairie Centre, followed by the facts:
1. The Prairie Centre is financed by the railways.
3. The Prairie Centre is a private club.
4. The Prairie Centre isn't democratic or accountable.
web posted January 15, 2001
The trouble with a grain cartel
By Craig Docksteader
You won't find a producer in the country who wouldn't like to see higher grain prices. But you'll find a lot of disagreement over how to get them there.
Recently, one proposal that has been making the rounds in the coffee shops is the suggestion that farmers should voluntarily cut production or establish some kind of grain cartel. By shorting the market, prices would be forced up, providing farmers with a better return for their grain.
In theory, the idea sounds attractive. Why not band together like OPEC and demand a better price? Or, why not engage in a united effort to cut production and force prices up? Lost revenue from unseeded acres could be recouped by investing in those commodity markets which would rise because of shortages on the world market.
But unlike OPEC and oil production, the proposals face a number of significant hurdles which should be considered in the coffee-shop debates:
1. The first hurdle would be obtaining the support and contractual commitment of thousands of farmers, equivalent to billions of bushels in production. One proposal suggests that to be successful it will require the involvement of 150,000 producers representing more than 8 billion bushels of production.
2. Unlike oil, grain is a renewable resource. Consequently, new players can enter the marketplace quickly, offsetting the impact of lower production in one area with higher production in another. Existing producers who were not part of the effort would quickly switch their crops to those which were anticipated to be more profitable, eroding the probability of price gains.
3. Then there would be the free-rider problem. Farmers who participate in the effort would carry all the risk if the program didn't succeed. But farmers who chose not to participate would still benefit from any success the program did have. This makes it difficult to attract producers to the program, and even more difficult to keep them if the program is successful.
4. Grain is grown and marketed in a global economy. The success of a hold-back project would not only be influenced by producers in Canada and the U.S., but also the EU, Australia, Argentina, China, India, Pakistan, Russia, Egypt, Turkey, Columbia, Brazil, Ukraine, Mexico, Morocco, South Africa, Syria, the UK and more. All of these are grain-producing countries, and their seeding plans would be affected by the anticipation of price shifts. If the market price of a certain grain was expected to bump up, that commodity would attract new acres around the world.
But even if all these obstacles were somehow overcome, the long-term effects of a successful cartel or hold-back could arguably do more harm than good. Some markets currently held by Canada would undoubtedly be lost. With decreased production, Canada would not be able to service its customers, and other exporter countries would move in and pick up the slack.
Furthermore, after increasing production to service these new-found markets, these exporter countries would not graciously bow out when Canada resumed its historic production levels. Consequently, Canada would not only lose market share, but world production would be higher than ever.
This is what happened in 1980 when former U.S. President Jimmy Carter
decided that the US would not sell wheat to Russia. The embargo provided
a windfall opportunity for countries that competed against the US, and
Russia began to increase its own wheat production in an effort to achieve
self-sufficiency. The impact of this is still being felt today.
web posted January 8, 2001
The wisdom to know the difference
By Craig Docksteader
Of all the myths about a voluntary Canadian Wheat Board, the one which finds the greatest amount of support goes something like this: "A voluntary CWB would drive the price of wheat down because the CWB will have to compete with 110,000 individual farmers and a bunch of grain brokers. Multiple sellers in any market results in lower prices."
The argument sounds convincing. At one time or another everyone has shopped around for the best deal and attempted to convince one retailer to beat another's price. This experience is then extended to grain marketing, suggesting that by increasing the number of sellers you lower the price, and by reducing the number of sellers to one (the CWB), you can push the price up.
But is it true? Does having a single seller of prairie wheat increase the price that farmers receive for their product? Will a voluntary CWB cause the price of wheat to decline? A closer examination suggests the argument is faulty for a number of reasons:
1. The current slump in wheat prices demonstrates that the price of wheat responds to the same law of supply and demand which affects the prices of other commodities. If voluntary marketing drives the price down, commodities such as canola, oats, rye, flax, lentils, canary seed, mustard, and soybeans should never be more profitable than wheat. Yet often the opposite is true.
2. Although the CWB has a buying monopoly, it has no selling monopoly. The CWB only holds about 20 per cent of the world wheat export market, and has no ability to ask more for their wheat than the next exporter without running the risk of losing customers. This explains why the CWB has not been able to counter the current slump in prices. If some buyers are prepared to pay a little more because of good quality or good service, this would not change under a voluntary CWB.
3. Allowing prairie producers to choose who markets their grain would not substantively change the number of sellers in the world export market. Few prairie farmers would export their own wheat if the CWB was voluntary. Most would either continue to use the CWB, or sell to an existing exporter such as Sask. Wheat Pool, UGG, Agricore, Cargill, etc. Contrary to the alarming picture painted by some, under a voluntary CWB, 1,000 farmers would not show up in Japan or China trying to sell their crop.
4. Under a voluntary system, grain companies and the CWB will not be able to draw grain into their system unless they offer competitive prices. In order to make advance sales, grain companies will have to secure a supply of grain. To do this they will offer contracts to producers. In order to convince farmers they should contract with them instead of the grain company down the road, they will have to offer a better price or more competitive basis. Rather than selling to the lowest bidder, farmers will sell to the highest bidder, putting upward pressure on prices, not downward.
There are many challenges facing prairie agriculture today. Some are within our reach to change, and some are not. Although a voluntary CWB is not a panacea, it would address a number of problems and give producers more control of their industry. Perhaps the best advice available can be found in the familiar saying: May we have "the serenity to accept the things we cannot change, the courage to change the things we can, and the wisdom to know the difference."
web posted January 1, 2001
Here we go again
By Craig Docksteader
With the Liberals back in power in Ottawa, it's just a matter of time until the Species at Risk Act gets resurrected. After seeing the Act die twice because of an election, it is highly unlikely the Liberals will let it happen again.
That's unfortunate for prairie landowners. From the beginning, the proposed law has been defective. Initially patterned after the U.S. Endangered Species Act, it was long on punishments and short on rewards and positive incentives. There was no mention of voluntary, cooperative efforts, and fines for landowners could reach as high as $250,000. The Act took a heavy-handed approach to protecting endangered species, promoting "conservation by intimidation".
By the time David Anderson became Minister of the Environment, he was the fourth Liberal cabinet minister to tackle the issue in four years. After making numerous changes to the Act, he introduced the latest version on April 11, 2000. For the first time, voluntary conservation efforts were part of the strategy, and landowners were promised compensation for losses resulting from the Act.
But despite these improvements, the Act remains fundamentally flawed. In an effort to provide a "balanced" approach to conservation, Anderson insists on employing a "carrot and stick" approach which will see incentives on one hand and punishments on the other. Those who do not cooperate with the government's agenda could find their land subject to regulatory confiscation, where land use and development would be restricted in order to protect a species' habitat.
This preoccupation with "balancing" the Act has even skewed the promise of compensation. Although Minister Anderson's proposal allows for compensation, it has been limited to those who suffer loss as a result of any "extraordinary impact of the Act". A recent report submitted to the Minister, interprets this to mean that compensation should not kick in until landowners experience a loss equivalent to 10 per cent of their property's value. Once that threshold is reached, only 50 per cent of any additional losses would be covered.
In other words, a landowner would only receive $4,000 compensation for a $10,000 loss on land worth $20,000. The higher the value of the land, the greater the loss that would have to be absorbed by the owner. In spite of the government's attempt to make it look fair and balanced, some landowners could pay dearly for their part in protecting endangered species.
If the most recent Species at Risk Act is reintroduced in Parliament, and the recommendations on compensation accepted, farmers and ranchers will be expected to participate in conservation efforts or face the consequences. This flies in the face of what has been clearly demonstrated in efforts to protect endangered species around the world: Voluntary, non-regulatory, incentive-based measures work, and heavy-handed, punitive measures do not.
Successes in wildlife conservation have built on the good will of landowners and worked with them in a cooperative fashion without the threat of regulatory confiscation. As soon as you veer from this model, you make the presence of an endangered species unattractive to landowners. In the U.S., this has resulted in a practice known as "shoot, shovel and shut-up", where some landowners rid their property of endangered species in order to prevent financial losses.
Regrettably, on the course that the federal government has charted, the
same consequences are possible in Canada. It's difficult to see how this
can be called protection for endangered species.
web posted December 25, 2000
New year brings new opportunities
By Craig Docksteader
With the New Year comes new beginnings. Many people see it as a time to leave the past behind, make new resolutions and turn the page. It's a time to look forward to the opportunities that tomorrow will bring, and put aside the disappointments of yester-year.
But for former CWB Commissioners Lorne Hehn, Richard Klassen, and Gordon Machej, this January 1 is more significant than usual. After leaving the CWB, all three were handed a severance package worth a quarter of a million dollars, on the condition that they would not work in the grain trade in a competitive position with the CWB for two years. January 1, the two years are up, and the former Commissioners can go to work for whoever they want.
The purpose for the two-year condition was understandable. As former Commissioners, Hehn, Klassen and Machej were privy to significant amounts of commercially-sensitive information. The severance deal ensured that they would be prevented from taking that information and using it to the benefit of a CWB competitor at the possible expense of the CWB.
Now that the two years are up, however, the playing field is wide open. Anything is permissible. Hehn could go to work for the Australian Wheat Board, Klassen could become the next CEO of Saskatchewan Wheat Pool, and Machej could go to work as a consultant for the U.S. Department of Agriculture. All of the formerly commercially-sensitive information is two years old and apparently of little consequence.
That is, unless you're a producer.
It's no secret that the CWB routinely denies producers information on grain sales under the claim that the information is commercially sensitive. Even if a sales contract was closed in the 70's or 80's, producers are told that making the information public would result in lost sales, lost customers, and lost revenue for farmers. More than one CWB department head has insisted to the Prairie Centre that even sales information from the 1950's would be valuable to CWB competitors.
Although such alarming claims are useful in derailing requests for detailed information on grain sales, their accuracy is questionable for a number of reasons:
1. The two-year severance package for former Commissioners suggests that the CWB's real window of commercial-sensitivity is about 24 months. Since Hehn, Klassen and Machej can now take what they know and go to work for CWB competitors, producers should have access to the same dated sales information.
2. If historic CWB sales information has that much value in the marketplace, former CWB Commissioners should be a pretty hot commodity. Grain traders around the world should be standing in line to snap them up. There is little evidence that this is actually the case.
3. Grain trade insiders claim that those in the industry's inner circle are well aware of who is selling to whom, and often know the sale prices. Information travels quickly once a deal is made in the business world, and the grain trade is no different. It's only producers who are on the outside.
Most prairie producers would wish the former CWB Commissioners well in whatever new line of work they find themselves. The lack of commercial sensitivity in two-year-old CWB sales information means there is nothing to be gained by restricting the Commissioners' future employment opportunities. But it also means there's no reason to restrict producers' access to the same dated CWB sales information.
No Christmas cheer in endangered species recommendations
REGINA - (December 22) Farmers and ranchers could pay dearly for protecting endangered species under recommendations submitted to the government yesterday, says the Centre for Prairie Agriculture (Prairie Centre).
Environment Canada yesterday released a report by Dr. Peter Pearse, which outlines how the federal government should handle the issue of compensation to landowners affected by the proposed Species at Risk Act.
"If the recommendations of this report are adopted, a farmer or rancher could be forced to absorb thousands of dollars in lost income or lost property value in order to protect an endangered species", said Craig Docksteader, Coordinator with the Prairie Centre.
The report by Dr. Pearse recommends that compensation to landowners should not kick in until landowners experience a loss equivalent to 10 per cent of their property's value. Once that threshold is reached, only 50 per cent of any additional losses will be compensated.
"This means a farmer would receive only $4,000 compensation for a $10,000 loss on land worth $20,000", Docksteader said. "This does not constitute a fair approach to covering the cost of public policy. Since all Canadians benefit from protecting endangered species, all Canadians should share the costs equally. Putting a disproportionate burden on landowners will discourage their voluntary conservation efforts and could endanger species at risk rather than protect them."
Docksteader said all compensation should be at full market value. "The
federal government's concern that full compensation may serve as a disincentive
for voluntary conservation efforts, can be easily resolved", he added.
"Drop the stick and stick with the carrot. Build on the good will
of landowners, and work in a cooperative fashion without the threat of
regulatory confiscation. Voluntary, cooperative efforts have proven to
be the most effective approach to protecting endangered species. Regrettably,
the punitive nature of Dr. Pearse's recommendations will erode the effectiveness
of this approach."
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