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 July 26, 1999
The art of the oxymoron - Creating myths with words
By Kevin Avram
I recently heard someone say that a certain journalist always writes with an "unbiased opinion". I laughed, because that's an oxymoron. An oxymoron is a contradiction. It's a statement about something or someone that combines opposite or contradictory terms. The word literally means "acutely silly".
Being almost perfect, pretty ugly, or going on a working holiday are the same. Found missing, acting naturally, and having a minor crisis all fit into the same basket. Their companions are old news, plastic glasses, and thunderous silence. None of these things actually exist.
In the English language there are hundreds of these phrases that describe non-existent things. There may even be thousands. But regardless of their number the king of them has got to be "government efficiency". It's an oxymoron that sounds especially good on the lips of an aspiring politician, but as good as it sounds, it'll never happen. For a very very good reason, it can't happen.
Governments are inefficient for the same reason that dogs bark. It's part of their DNA. There's no way to change it. The DNA of a dog is biologic. The DNA of a government and why it will always be inefficient is determined by the manner in which it spends. In all of life there are just four ways to spend money:
The first is when people use their own money to buy something for themselves. When they do, they look for the best value at the best price. They hunt for bargains and greatly inconvenience themselves to find them. This is why ranchers and farmers haggle with equipment dealers and why thousands of stores across the country put items on sale.
The second way to spend is when people use their own money to buy something for someone else. They still want a bargain, but aren't as interested in pleasing the recipient as they would be if they were buying for themselves.
The third way to spend is to use other people's money to buy something for you. People in this position buy exactly what they want, but price no longer matters. If we could all buy cars under this type of arrangement the world would be full of Porsches and BMWs.
The fourth and final way to spend is to use other people's money to buy something for someone else. As humorist P.J. O'Rourke says, if someone finds himself able to spend millions of dollars in this kind of a situation, "who would give a %$&# about efficiency?" This is the world that governments live in, and because they do, the idea that they can be made efficient is a fantasy.
Lots of people say that government should be run more like a business. The truth is that it can't run like a business. Businesses always spend their own money. Governments always spend yours. That's why politicians like Sheila Copps and Paul Martin can give grants to businesses they'd never buy shares in, and pass fists full of cash to special interest groups. If they were spending their own money things would be very different.
Government efficiency is a myth. It is as far from reality as the doctrines of the Flat Earth Society. Who's doing the spending and whose money is being spent is always what determines efficiency. It explains why the best government is the government that does the least. And why the best politicians are those who work not to make government more efficient, but smaller.
Kevin Avram is a former director of the Prairie Centre/Centre for Prairie Agriculture, and continues to sit as a member of the Prairie Centre's Advisory Board.
web posted July 19, 1999
Manipulating the markets
By Craig Docksteader
When the prairie wheat pools were first established in the early 1920's, producers had high hopes for the new system. It held promise of being a grain handling and marketing system which would operate with farmers' interests in mind and iron out the troublesome wrinkles of farming in the 1920's. When the pools went on to capture more than 50 percent of grain deliveries over the first few years of operation, the euphoria climbed even higher. Pool members were convinced that by riding the wave of cooperation they had discovered the meaning of market power.
But as the years clicked by, the pools found themselves largely unable to deliver their promise of a better way and a better tomorrow. While the cooperative nature of the pooling system appealed to many growers because it averaged returns over the year and cut the established grain companies out of the pie, it was unable to deliver a better price to producers.
Many pool members and organizers had believed that spacing sales throughout the year would serve to stabilize grain prices and minimize the fall slump in the grain market. They thought that in bypassing the Grain Exchange and grain companies farmers would pocket an additional share of wheat sale profits. They thought that their new-found marketing independence would allow them to hold onto their wheat when prices were low, and only sell into the higher-priced markets. They thought that all these factors together would enable them to exert a measure of control over the price of wheat. But experience proved otherwise.
The Pools quickly found themselves defending the fact that they continued to sell 40 percent of the prairie crop in the fall after previously insisting that such activity depressed the price of wheat. In 1926, A. J. McPhail, President of both the Saskatchewan Wheat Pool and the Pools' Central Selling Agency explained it this way, "There is a bigger demand for Canadian wheat in the fall months than at any other season, and a much larger quantity can be disposed of now than in other months. You have to sell when the demand exists or you will find yourself holding the bag in your hands."
Furthermore, in 1929, McPhail admitted before the U.S. Committee on Agriculture and Forestry that, "I am coming more and more to the belief that in the final analysis it is the actual amount of wheat that is available in the world from time to time that has more to do with determining the average price level of wheat the same as any other commodity." McPhail's comments were an admission that the marketplace operates by the principles of supply and demand and that it is the size of world wheat stocks that largely determines price, not the supposedly shadowy dealings of grain traders at the Winnipeg Grain Exchange.
This position was a sharp reversal from the early Pool rhetoric that blamed price fluctuations on speculators and the Winnipeg Grain Exchange. What many Pool adherents had begun to discover, was that bypassing the Winnipeg Grain Exchange was not tantamount to bypassing the marketplace. The world wheat price could not be manipulated by the Pools' Central Selling Agency.
Not everyone was convinced, however. In fact as pool returns on wheat spiraled downwards from 1925 to 1931, some growers became convinced that the missing ingredient for obtaining price control was a monopoly on prairie grain sales. In 1943, they got it. What they didn't get was control over the price of grain. As the current slump in commodity prices demonstrates, the Canadian Wheat Board has to accept the world price for wheat, just like the Pools did in the 1920's.
web posted July 12, 1999
Grain groups say information at heart of Canadian trade dispute
The Canadian Wheat Board needs to produce information to either prove or disprove that it sells spring wheat, durum, and barley unfairly -- something it has been unwilling to do in the past -- or risk retaliatory measures by the United States.
That's the recommendation of 12 state and national commodity organizations, explained by Valley City, N.D. farmer Allan Skogen in a news conference on July 6 in Fargo. Skogen, who serves as vice president of the North Dakota Grain Growers Association, submitted documents in support of the position in a meeting on June 25 in Washington, D.C. with U.S. Trade Representative Charlene Barshefsky. The meeting was arranged by Sen. Kent Conrad.
"Can a monopolistic state trading entity (STE) like the Canadian Wheat Board, backed by the full weight of the Canadian treasury and regulatory laws, be assimilated into a free enterprise system without distorting other free-enterprise based markets? We feel we can no longer negotiate trade agreements with Canada without first addressing this fundamental economic question," said Skogen.
Studies conducted over the years to analyze the effect of Canadian exports on U.S. grain markets have resulted in a wide range of conclusions, he said. Some studies suggest that the Canadian system has minimal effect, with just a few cents loss per bushel when spread over the entire U.S. wheat complex, while others conclude that in the state of North Dakota alone, producer losses have been as large as $94 million, and losses to the state's economy in some years could have been as high as $250 million.
"There are two things that we have found with great consistency in these reports: one, that there is at least some level of damage, and two, there is not enough data available from the Canadian Wheat Board and the Canadian government to draw decisive conclusions," said Skogen. "That's the heart of the problem. The Canadian government has sole possession of key information badly needed to conduct a sound analysis to determine the level of fairness, or the lack thereof."
Skogen said an analysis conducted for the NDGGA by LMC international Ltd., an independent trade consulting firm headquartered in Oxford, England, with an office in New York City, confirms that there is not enough reliable information available to support sound analysis of the effects of CWB activities on U.S. grain markets.
"We believe the Canadian tactic of concealing this necessary information is designed to stall and confuse the issue for as long as possible, if not indefinitely, so they may continue to trade these commodities at what we believe to be our expense. This leaves U.S. negotiators postulating and guessing on very narrow and specific trade issues for which they do not have information to make sound trade policy," said Skogen. When comparing the openness and ease of accessing information in our trading system with the secrecy of the Canadian Wheat Board; Skogen says negotiations up to this point have been "like a football game where the Canadians maintain the secrecy of their playbook, and at the same time have full access to the playbook of the U.S. trade negotiators."
Skogen pointed out that the Canadian grain trade problem should not be taken lightly, as the CWB controls over 20 percent of the wheat and barley traded around the world. "This single entity controls three times the wheat or put another way, has three times the market dominance, than a combined Cargill and Continental Grain would have in world small grains trade."
"It's a mistake for anyone to suggest that a monopolistic trading entity is of little economic significance, when that entity operates in secrecy by different rules and controls the sale of over three-fourths of a billion bushels of wheat and barley. This is a very significant issue. That's why the North Dakota Wheat Commission has retained the services of former USTR Mickey Kantor to focus attention to this issue. It's why farmers continue to hold protests at the U.S.-Canadian border to draw attention to the problem," said Skogen. Some of the key information needed from Canada includes full disclosure of grain acquisition and handling costs, non-disclosed sales and pricing strategies, and possible freight differentials and subsidies. "Immediate access to all Canadian information needed for proper analysis is the missing piece of a trade jig saw puzzle that's been sitting on the table for far too long," said Skogen.
Barshefsky recognizes that current data does not reveal sufficient information for assessing the extent of the Canadian grain trade problem, said Skogen. "In what we would characterize as pledging a new level of commitment, the Ambassador recognized that we cannot afford to wait for pending negotiations under the World Trade Organization to address these problems." He said Barshefsky has requested that U.S. grain groups help in the formation and execution of strategies to address the situation. "We hope to join Ambassador Barshefsky in asking the Canadian government to abandon its continued tactic of intentionally confusing and subverting crucial grain trade analysis and join us in search for real truth," said Skogen. "If they refuse to do so; then we believe the only viable course of action left is for our government to use whatever means available, including if necessary, tariffs and quotas to restrict imports of these commodities until the Canadian government provides the information we need to address this grain trade problem."
(The position paper submitted to U.S. Trade Representative Charlene Barshefsky may be found online at: www.smallgrains.org)
Why a costing review is a bad idea
By Craig Docksteader
It seems like almost everyone has jumped on the bandwagon applauding the CTA's costing review for the railroads.
The Canadian Wheat Board was one of the first to press for the review, alleging that the railroads have seen reduced operating costs over the last few years and yet have not passed these savings on to farmers. In an attempt to prove their point, the CWB aggressively lobbied the federal government to examine the books of the railroads and come up with a verdict.
Even after Transport Minister Collonette rejected the idea, the CWB kept spending farmers' money on ads, in an attempt to whip up public support. Not surprisingly, it seemed to work.
It's one of those positions that are politically poplar right now. The suspicion towards the railways that has always rumbled just below the surface was stirred up again in the whole debate over how to reform the grain transportation and handling system. Consequently, whether you think a costing review will accomplish anything constructive or not, you're almost forced to hold your nose and go along with it. Like the emperor with no clothes, nobody's anxious to break ranks and suggest that something's wrong with this picture.
But something is wrong. On the surface, the reasons for a costing review appear credible: It will serve as a benchmark to measure the effectiveness of any future reforms to the grain transportation and handling system. But if you scratch the surface, you find that much of the support is fueled not by a desire for reform, but an opposition to it.
While a costing review is a necessary component of a regulated system, under a de-regulated system, it is an unnecessary waste of time and money. To promote such a review amounts to little more than an attempt to shore up support for the failed regulatory system, and delay progress on implementing constructive reforms.
What few people seem to have considered is that in a competitive, commercial grain transportation and handling system, it doesn't matter how much money the railways make. That's because, in a truly competitive, commercial system, those who want a cut of the farmer's cheque will have to earn it.
In a regulated system, nobody has to perform to get paid. That's why the transportation system fell apart once again in the winter of '96. In spite of a public relations campaign to make the railroads look like the bad guys, the whole transportation fiasco was only possible because the existing regulatory system protects all the players except the farmer. For over fifty years, the farmer has been the first to pay, and the last to get paid. Someone else decides who gets paid for what and then passes the farmer a cheque for whatever is left over.
The job of the implementation committee for Estey's recommendations is to change this. If they properly implement a truly contractual, competitive system, it could put the farmer in charge for the first time in the history of the nation. If they fail, we're back where we started, with a transportation and handling system that is over-charging, under-performing, and unaccountable.
If that happens, a costing review would be helpful. Until then, it's a waste of time and money.
web posted July 5, 1999
Dual-Marketing in the 1920's
By Craig Docksteader
Whether you love 'em or hate 'em, the story of the prairie Wheat Pools is an intriguing one. For years it has been told and re-told as parents and grandparents proudly passed on the memories to the next generation: How, in the turbulent times of the 1920's, farmers took matters into their own hands, determined to see a better future for their farms and families; how, by joining together in a spirit of cooperation, they established a grain handling and marketing organization which was handling over 50 per cent of the prairie wheat crop within a few short years; how, by working together, farmers went from feeling victimized by private grain traders, to having influence in their industry.
There can be little debate over the fact that the establishment of large farmer-owned wheat cooperatives was a significant achievement. It was a struggle against the odds, in an attempt to better the plight of farmers. It held promise to right the perceived wrongs in the industry by pooling sale returns over the course of the crop year, downsizing the marketing bureaucracy, returning value gains realized through blending back to the farmer, ensuring equal opportunity for grain delivery, eliminating unnecessary duplication in grain handling services, and bypassing the speculative system at the Grain Exchange by selling 75 per cent of the crop directly to buyers. It had all the makings of a fairytale, which, for many years, seemed to live in anticipation of the classic pronouncement and they lived happily ever after.
But the ending never came. In fact, as the story of the Pools winds its way through more than 75 years, the glow on the faces of those who love to tell it begins to fade. While descriptions of the early years are full of David and Goliath imagery -- how everyday farmers took on the established grain trade -- more recent events have confused the picture and blurred the lines.
For some reason, in spite of significant participation under a voluntary system, and then forced participation under a legislated system, the promise of prosperity through orderly marketing has failed to materialize. Farmers today still echo the quote from the early twenties, "We note that our wheat appears to enrich every hand touching it, except our hands -- and we do the work, and take all the growing risks."
What the history of the Wheat Pools successfully demonstrates, however, is that a voluntary, single-desk, cooperative pooling system can operate alongside free access to the open market. What present-day critics of a dual-market system say cannot work, already did, in the 1920's.
In the early years of cooperative wheat pooling, farmers were free to market through the Pool, or on the open market. Those who chose the Pool route would receive whatever benefits were realized from averaging the returns of grain sales over the year, and distributing those equitably amongst Pool members. Those who wished to take their chances on the open market were free to do so as well.
Even the fact that the Pools initially owned no elevators or terminals did not prevent dual-marketing from proceeding. The Pools simply struck agreements with the existing elevator companies until enough money was raised to acquire their own grain handling facilities. Even then, large quantities of Pool wheat continued to flow to the waterfront through non-Pool elevator spouts.
Furthermore, in the 1920's, the Pools' single-desk marketing arm, called the Central Selling Agency, successfully practiced what is purported to be impossible today: It took possession of the grain at the port terminal. It was not in the business of handling grain, but strictly limited its operations to the selling of Pool wheat.
The belief that dual marketing cannot work fails to consider the history of prairie agriculture. To subscribe to this belief is to deny what our forefathers already proved possible 75 years ago.
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.
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