Farmers for economic freedom

Updates from the Canadian Farm Enterprise Network, Canadian Farmers for Justice and the Prairie Centre. Several of the items appearing here originally appeared in an email list operated by Dwayne Leslie at http://www.prairielinks.com.

web posted May 1999

More than 10 000 petitions and letters delivered

The Prairie Centre has received over 10 000 petitions and letters from farmers demanding greater access to information held by the Canadian Wheat Board. The petitions and letters were displayed today at a news conference in Red Deer, Alberta, where the Prairie Centre called on the new CWB board of directors to support an end to unnecessary secrecy.

"Farmers are frustrated by needless secrecy at the Wheat Board and want to see it changed," said Jim Ness, President of the non-profit research organization. "Over the last few years farmers have sent us more than 10 000 petitions and letters, demanding that the Canadian Wheat Board be required to release information which is no longer commercially sensitive. Today [April 15, 1999] we are forwarding these on to the individuals to whom they are addressed, starting with the new directors of the Canadian Wheat Board."

"This is not just some clinical debate about corporate accountability," said Ness. "This concerns our livelihood and the future of our farms. The current farm income crisis requires that no stone be left unturned in an effort to ensure the viability of the family farm. Farmers have every right to evaluate whether the CWB is doing a good job selling their grain or not, but we have no ability to do so because of secrecy at the CWB. The federal government refuses to release the details of grain sales even after a sale is 10, 20, 30, or even 50 years old."

Ness noted that it is impossible for the CWB to endanger its competitive position by releasing non-sensitive information. "This worn-out objection is indefensible nonsense," he said. "Farmers don't want any information that is commercially sensitive. What we want is action from the federal government, establishing a clear, accountable definition of what CWB information is not sensitive, along with a legislated process for obtaining that information. Furthermore, we want the new CWB directors to demonstrate their willingness to be accountable to producers by supporting this process, rather than bucking it."

A simple question

By Craig Docksteader

When the debate over the new Wheat Board Act was at its hottest, Ralph Goodale, Minister responsible for the Canadian Wheat Board, threw a sop to producers -- he would give Canada's Auditor General one-time access to the books of the CWB.

The move came largely out of the blue. Up until this point, Goodale had repeatedly snubbed farmers' requests to see the Auditor General appointed as the Board's regular auditor. He insisted that because the Board already had an auditor - Deloitte Touche - it didn't need to come under the purview of the Auditor General. But as things go in politics, when things get hot its a good time to make some kind of symbolic gesture.

And symbolic it was. There were no terms of reference laid out for the Auditor's examination, no commitment to make the results public, no indication of how extensive the audit would be, and no consultation process to determine the extent of these things. For all intents and purposes, it appeared to be a slick political move, having the appearance of something significant while not committing to anything substantive.

It's virtually impossible to get inside the mind of any seasoned politician, and even more so with Minister Goodale. What his real intentions were, and why he made the decision in the eleventh hour, is anybody's guess. But it's beginning to appear that by leaving the details undefined, Goodale may have done producers a favour.

At this point, only one significant restriction has been placed on the Auditor General -- he has no mandate to assess the merits of public policy. He can evaluate how effectively the CWB is carrying out its public policy purpose, but cannot examine or make a determination on the actual value of this purpose. Producers hoping for an authoritative voice to either commend or condemn the monopoly powers of the CWB will not find it in the Auditor General. This role is reserved for Parliament and the court of public opinion.

Beyond this restriction, however, the Auditor General's Office says nothing has been precluded from them. While the usual CWB audit simply looks at whether the numbers on the CWB's financial statements are accurate, the Auditor General can go much further.

He can examine procedures, performance, efficiency, accountability, control systems and more. He can look at how well the CWB is managing risk and ask questions such as: What can go wrong? What is the probability of it going wrong? What are the consequences? Can the risk be minimized or controlled?

He can assess whether certain events or actions may adversely affect the corporation, through exposure to financial loss, loss of reputation, or failure to deliver the program with due regard for economy, efficiency, cost-effectiveness, or the environment. Instead of being simply concerned with controls and processes, the Auditor General can focus on results.

The specific parameters of the audit will take months to formulate. Because the CWB is not usually audited by the Auditor General's Office, the audit team will initially spend quite a bit of time acquiring a sound knowledge of the CWB's mandate, mission, goals, programs, operations and administrative activities. The bulk of the actual examination is not expected to take place until next year, with the remaining months of 1999 devoted to extensive planning, information gathering, and the formulation of audit objectives. When the audit is finished, the new CWB board of directors has promised to make the report public.

After more than fifty years, the move to give the Auditor General an inside look at the workings of the CWB appears to be scoring political points for both Minister Goodale and the CWB. It fosters trust, diffuses criticism, and promotes goodwill. It will be of benefit to Parliament, the CWB, and producers; which begs the question, why didn't it happen sooner and why shouldn't it happen every year?

Understanding the marketplace

By Craig Docksteader

In a recent issue of Agriweek, author and publisher Morris Dorosh attempts to explain some fundamentals about how the marketplace works. Written as a dialogue between two individuals, the article makes a number of good points and challenges some popular myths. Portions of the article are reprinted below, with kind permission of Agriweek.

* * *

Who exactly sets commodity prices?
Well, the market sets them.

What is the market?
The market is where supply and demand meet.

Is the commodity exchange the market?
No. The commodity exchange provides the facilities and trading framework where buyer and sellers can conduct business. Buyers and sellers are the market.

What are commodity futures for?
Futures trading provides both sellers and buyers with the opportunity to lock in firm prices in the future, in some cases more than a year in advance of when they will actually buy or sell the commodity, helping to reduce their risk from unexpected price movements.

How does the market know what the correct price is for a given commodity?
The correct price for anything is whatever an informed buyer is prepared to pay.

Why do commodity prices go up and down?
Commodity prices rise when the supply is unusually low or demand is unusually high. They drop when supply is unusually large or demand is unusually weak.

Why does the same commodity sell at one price today and another price tomorrow?
Because new information has come to light concerning present or future supply or demand for the commodity.

Why can't the seller set commodity prices?
The seller can't set prices because if they are set too high no one will buy the product and if they are set too low, the seller foregoes revenue he could have captured.

Why can't the buyer set commodity prices?
The buyer can't set commodity price because if the priced he offers is too low no on will sell to him. If the buyer sets a price that is too high, many will be willing to sell but the buyer will pay more than necessary.

What guarantee does the seller have that the market will price his goods fairly according to his cost of production?
None. No buyer has any reason to care about anyone's cost of production.

Does the market take into account the seller's cost of production at all?
No.

Can the seller fool the buyer into paying a higher price?
No. Very few commodity buyers are fools and very few fools are buyers.

Can the buyer fool the seller into accepting a lower price than another buyer might offer?
Only if the seller is a fool.

Can the government set commodity prices?
Only if the government is a fool.

Do sellers compete with each other to sell?
Yes.

How?
They attempt to get higher prices than other sellers.

Do buyers compete with each other to buy?
Yes.

How?
They try to buy commodities more cheaply than their competitors so that they can sell the products they make at lower prices than their competitors.

Why don't sellers band together to keep the product off the market, forcing buyers to pay higher prices?
Many commodity cartels and monopolies have existed throughout history but none has succeeded over time because of human nature and the fact that producers of a commodity must sell it sooner or later to stay in business.

So what can the seller do?
Recognize that the issue is profit, not price, and learn to produce the commodity at a lower cost than anyone else.

* * *

It would be difficult to say it any better.

Taking a different approach

By Craig Docksteader

When it comes to the debate over the government's monopoly on wheat and barley exports, both sides have one thing in common: They want a profitable, sustainable future for prairie agriculture.

The argument is about how to get there.

Those who favor the government monopoly adamantly insist that those who oppose the monopoly are going to destroy the grain industry on the prairies. Those who want marketing choices for farmers are convinced that the monopoly is already severely limiting the prairie grain industry, if not slowly destroying it.

For those who are standing on the sidelines scratching their heads over the issue, the whole thing can be a little confusing and sometimes downright frustrating. As the following list indicates, there may be few issues more polarized than that of the role of government in prairie grain marketing.

Here's how monopoly promoters and dual marketers tend to line up on some of the core issues:

1. GRAIN PRICES

Monopoly Promoters: The Canadian Wheat Board gets a higher price for farmers' grain because of it's monopoly status.

Dual Marketers: The Canadian Wheat Board usually gets a lower price for farmers' grain in spite of its monopoly status.

2. COMPETITION

MP: If farmers had to compete against one another for markets, it would drive the price of wheat down.

DM: Competition between farmers would have no downward effect on price and would result in the development of new markets.

3. PUBLIC OPINION

MP: The majority of prairie farmers prefer to market their grain through a government monopoly.

DM: The majority of prairie farmers prefer to have a choice in where they market their grain.

4. PROTECTION

MP: The CWB monopoly protects farmers from large corporations which would take advantage of them.

DM: The CWB monopoly makes farmers captive customers of large grain and transportation corporations by restricting their ability to take their business elsewhere or bypass the existing system entirely.

5. RIGHTS AND FREEDOMS

MP: Taking away the civil liberties of the minority is okay if the majority votes in favour of it.

DM: Civil liberties are fundamental rights whether you are a minority or majority, and should be protected.

6. PUBLIC POLICY

MP: The CWB monopoly exists for the greater public good.

DM: The CWB monopoly has nothing to do with the greater public good. The greater public good would be better served by giving individual farmers the freedom to choose how they market their own private property.

7. DUAL MARKETING

MP: The Canadian Wheat Board could not operate as a voluntary agency.

DM: The Canadian Wheat Board would be more efficient and accountable as a voluntary agency because it would have to earn farmers' business.

8. RISK MANAGEMENT

MS: The CWB monopoly is necessary because it balances the highs and the lows of the market by averaging prices over the course of the crop year.

DM: The CWB monopoly severely restricts farmers' ability to use risk management tools, thus making them more vulnerable to market highs and lows.

9. MARKETING PERCEPTIONS

MS: I don't have time to travel to China or Japan to sell my grain. Having a government monopoly means I don't have to.

DM: I don't have time to travel to China or Japan to sell my grain. I can contract with the marketer of my choice to do this for me.

10. OTHER CROPS

MS: All crops should be under the CWB monopoly.

DM: All crops could be under the CWB if it wasn't a monopoly and farmers were free to choose who marketed their grain.

When government gets arrogant

By Craig Docksteader

As former members of the Saskatchewan Progressive Conservative party slowly file through the provincial courthouse on fraud charges, the nation watches in curious ambivalence. With fourteen former MLAs and staff members convicted of fraud-related offenses totaling more than $1 million, it's being billed as the biggest corruption scandal in the province's history.

In clockwork fashion, the latest revelations of wrong-doing are dutifully reported in the national media. On the street, they are met with the usual clicking of the tongue and shaking of the head, while in the legislative corridors, partisan-types stride about smugly, carefully concealing their self-righteous gloating. In a country where public office is no longer a respectable position of service, this kind of news confirms our unspoken suspicions and becomes a trump card that politicians play at election time.

But while there is no disputing the fact that the activities of the convicted individuals were illegal and reprehensible, something seems profoundly wrong with the whole picture. It's like the Canadian public has been suckered into believing this was an isolated incident, created solely by the greed and dishonesty of a few. The sooner we shuttle them through the justice system, the sooner this whole embarrassing mess will be over.

It might, but if you peel back the veneer that has been buffed by political opportunism, you'll find that it's not quite so cut-and-dry. Consider the following:

1. The rules governing some of the disputed MLA expense allowances were fuzzy at best. MLAs were provided with a "Members Handbook", which itemized numerous "directives" issued by an all-party group called the Board of Internal Economy. These directives were to be the operating rules or guidelines concerning the use of their MLA allowances. Many who worked closely with these issues in the late 80s and early 90s, maintain that the directives were often too broad or too vague when it came to specific applications. When some convicted MLAs claim they were unaware they were breaking the rules, they could be telling the truth.

2. Meetings of the Board of Internal Economy were conducted in secret. Minutes of the meetings were not available and observers were never allowed. For those outside of government who were attempting to determine the parameters of the guidelines, this only added to the difficulty of understanding the intent or debate that surrounded the formulation of these directives.

3. Some MLA allowances could be claimed with little or no documentation necessary to prove the expense actually took place. For example, MLAs were entitled to a travel allowance to cover their expenses of traveling by car. In order to claim this allowance, a simple written request was required, with no supporting documentation or mileage statement necessary.

4. Politics of the day were rife with self-serving, elitist policies. Under previous administrations, MLAs had granted themselves handsome pension plans, gold-plated severance packages and even decided that MLAs could keep all their taxpayer-funded constituency office furnishings and equipment after they retired or lost an election.

5. When challenged on the lack of accountability in such matters, politicians balked. Initially, neither the government nor the opposition was warm to the idea of introducing reforms. Only when public opinion overwhelmed them did both parties cave in.

While it may be convenient to simply write off the scandal as the work of an incompetent few, the fact is, the roots go much deeper. What is being dubbed as the province's biggest corruption scandal, is really the symptom of a more serious problem that is still alive and well in Canada: An unaccountable, elitist political mindset.

Too bad there wasn't a law against that.

What about oat sales?

By Craig Docksteader

In 1949, oats were brought under the monopoly of the Canadian Wheat Board. For forty-one years, producers were required by federal law to deliver all their oats, which were destined for either export or human consumption, to the CWB. The CWB would sell the oats, pool the sales revenues, deduct their expenses, and divvy up the balance with the growers - all without producers ever knowing what the CWB actually got for their bushel of oats.

But in 1989 this all changed. The Ag Minister of the day, Charlie Mayer, pulled oats out of the CWB monopoly and gave growers the freedom to market their crop to the highest bidder.

For many farmers, it was the first time in their lives that they were able to sell a bushel of oats and know the actual price it sold for. If they were not satisfied with a purchase offer, they could turn it down. If they thought they could get a better price somewhere else, they could pursue it until they were convinced that the price they were being offered was the best they could get.

Like any change to institutions of government, this one did not happen without some controversy. Even today there are farmers who would like to see oats brought back under the CWB monopoly. They are convinced that a single-desk marketing structure better serves the interests of farmers by extracting a higher price from the marketplace.

The problem is, as with all popular defenses of the status quo, there is no hard evidence supporting these convictions. Because of secrecy at the CWB, it is impossible to conclusively demonstrate that the monopoly achieved better prices than what could have been obtained on the open market. All we have are what the economists call aggregate numbers, which basically means all corresponding oat sales were lumped together and reported as a total figure. The resulting generalities provide next-to-useless information if you want to evaluate the benefits of marketing through a government monopoly.

This is the same frustration faced by wheat and barley growers today. There is a growing demand for detailed CWB grain sales information which would allow an objective and open analysis of CWB marketing performance. Year after year, growers are told that the CWB obtains sale premiums because of its single-desk status. But over and over, producers are denied the information to verify that this is actually happening.

Surprisingly, while the CWB's defense of perpetual secrecy is somewhat flimsy, it has been remarkably effective in thwarting disclosure: "CWB sales information is commercially sensitive and therefore can't be released," the argument goes. "You'll just have to trust us."

But hold on a minute. If sales information cannot be released because of commercial sensitivity, how long does this sensitivity last? And perhaps someone could explain how the price of individual oat sales from 10, 20, 30, and 40 years ago is commercially sensitive when the CWB doesn't even sell oats anymore.

Perhaps while the CWB invents a defense of why 30-year-old wheat sale contracts to the non-existent USSR are still commercially sensitive, they could consider releasing detailed information on oat sales. With no oats for the CWB to sell, there are no CWB oat-buying customers. This means there are no CWB oat-sale competitors, no commercial sensitivity and no reason why ten-year-old detailed sales information could not be released.

Who knows? Maybe releasing detailed sales information will conclusively prove all those dual-market agitators to be wrong. Maybe the CWB really does extract premiums from the marketplace because of it's monopoly. Maybe growers really are better off with a government monopoly. Maybe those who argue for freedom of choice have been on the wrong track all along.

But then again, maybe not.

Craig Docksteader is Coordinator with the Prairie Centre/Centre for Prairie Agriculture, Inc. "Where Do We Go From Here" is a feature service of the Prairie Centre.

Prairie Centre/Centre for Prairie Agriculture, Inc.
#205, 1055 Park Street
Regina, SK
S4N 5H4

Phone: 306-352-3828
Fax: 306-352-5833
Email: prairie.centre@sk.sympatico.ca


The CFEN needs your help! The battle against the Canada Wheat Board can only continue with your support.

Canadian Farm Enterprise Network
Box 521
Central Butte, Saskatchewan
S0H 0T0
CANADA

Write the following and demand free market rights for Western Canadian farmers!

The Canadian Wheat Board
423 Main Street
P.O. Box 816, Stn. M.
Winnipeg, MB
Canada
R3C 2P5

Telephone: (204) 983-0239 / 1-800-ASK-4-CWB
Fax: (204) 983-3841

Email Address: cwb@cwb.ca

Ralph Goodale
Minister Responsible for the Canada Wheat Board
Department of Natural Resources Canada
21 - 580 Booth Street
Ottawa, ON
Canada
K1A 0E4

Telephone: (613)996-2007
Fax Number: (613)996-4516
Email Address: rgoodale@NRCan.gc.ca




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