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Why don’t we know?

Whether you were in favour of changing the CWB or against it, isn’t it time we get clear, unbiased answers about what the impact has been?

Ask any western grain farmer what is significant about August 1, 2012, and most will tell you it was the day the federal government eliminated the Canadian Wheat Board monopoly on the sale and export of wheat and barley from Western Canada.

Some farmers will refer to it as the “grain marketing freedom day.” Others farmers claim it was the beginning of the biggest ever transfer of wealth from farmers to the grain trade.

There is no question some farmers “won” and others “lost” as a result of the change. Farmers close to the U.S. border and those with better access to multiple buyers and/or good rail access likely gained from increased competition for their grain.

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Farmers with limited marketing opportunities, or who lacked the marketing skills or size necessary to compete in an open market system, were likely disadvantaged.

All farmers will offer anecdotal “evidence” as to whether they feel the change was beneficial or damaging to their farm operation. It’s always hard to be confident, however, that this “evidence” is free from personal bias.

Indeed, the question no one has been able to accurately answer is: What has been the net economic impact in Western Canada resulting from the privatization of the Canadian Wheat Board?

An even tougher, unanswered question is: What impact has the privatization of the Canadian Wheat Board had on rural society in Western Canada?

Farmers cannot answer these questions because there has not been any comprehensive study or evaluation of the impact of the elimination of the CWB monopoly and the subsequent privatization of the CWB. Shouldn’t we be demanding a real analysis of the most significant change in our grain handling system in decades?

Let me be clear, this column is NOT a call for the re-establishment of a wheat board. It is however, a demand for accountability by politicians for the legislation they pass.

Should we not expect, and in fact should we not demand that politicians abide by strategic planning and management processes that are common practice in business?

SMART Management

Successful business managers set goals, targets, and objectives by following the SMART criteria. Plans must be: Specific, Measurable, Attainable, Relevant and Time-related.

Yet before eliminating the CWB monopoly, there were no in-depth studies or analyses of the impact of the elimination of the monopoly. Instead, we only had heated rhetoric and political posturing.

In the Frontier Centre for Public Policy’s 2011 paper entitled “Removal of the Canadian Wheat Board Monopoly: Future Changes for Farmers and the Grain Industry,” Dr. Milton Boyd presented some of the pros and cons of converting the CWB to a voluntary marketing agency.

Boyd suggested deregulation could lead to new investment, innovation, more value adding and the creation of new grain companies or co-operatives. He also predicted that more grain may be traded on the ICE Futures Canada Exchange in Winnipeg.

Boyd also warned, though, that a voluntary board could result in the “loss of some export customer relationships” and “there may be voids left from the Board no longer serving as an advocate for farmers on grain issues, regulatory issues, transportation issues, and other issues.”

Boyd questioned if there would be sufficient competition among the private grain companies and within the grain transportation sector in the absence of the Board monopoly.

Ideally, a planning process like SMART would have considered these pros and cons. Then very specific legislation would have clearly stated the vision and goals the government had for the future of grain marketing and the CWB while minimizing potential disruptions to both the current and the envisioned marketing system.

More importantly, the process would have identified measurable criteria which could have been monitored to track the impact of the removal of the CWB monopoly.

There is a well-known management axiom: “failure to plan is planning to fail.” Yet there was next-to-no planning before the elimination of the CWB monopoly. I wonder if legislators even had a vision or goal for what they wanted the grain industry to look like beyond pursuing a nebulous idea of “marketing freedom.”

These summative evaluations build on data collected in the earlier stages. photo: File

SMARTER Management

Management experts now promote the SMARTER criteria. The “ER” addition refers to Evaluate and Review, two critical steps that are often overlooked in change management. Did changes you made in your business actually have the impact you intended? Were there unintended negative impacts from the change? And what in your plan needs fine tuning so you can achieve your objective?

The best evaluation and review is continuous, starting as soon as a change decision is made and implementation happens. At a minimum there must be a one-time assessment to ensure the changed system is operating as planned.

If you decide to grow a new crop, you evaluate that decision at the end of the year to determine if it is a crop you should continue to grow. You also evaluate the quality of work provided by a contractor or custom operator you hire before hiring that person again.

Review and evaluation of any and all decisions is critical for success in any business and it should be just as important for governments too.

Ideally, a government would conduct both economic and social analysis before enacting any legislation and it would follow up the implementation with an honest and critical evaluation of all new programs. That is something we should be demanding.

Our grain industry needs an “Outcome Evaluation” to find out if the elimination of the monopoly actually met the goals and intentions of government.

We also need an “Impact Evaluation” that identifies all positive and negative impacts that have occurred as a result of the privatization of the CWB. It needs to measure the net effects of the loss of the monopoly both economically and socially.

Since there has yet to be any meaningful evaluation of the elimination of the CWB, we simply cannot judge whether this change was in fact a benefit or a cost to the western Canadian grain industry.

Instead, for instance, we do not know for sure how much impact (if any) the elimination of the monopoly has had in the rail transportation backlog experienced in 2013 and this past winter. Nor do we know if the privatization of the CWB has added to ship wait time and demurrage costs.

We cannot even determine if farmers are actually receiving a lower percentage of the value of grain exports because there is less transparency in export pricing now.

Since there has been zero government evaluation of the impact the elimination of the CWB monopoly has had in the five crop years since the change, it is obvious government sees no need to follow good business principles. But where are our agricultural researchers, economists, and rural sociologists? Where are our agricultural associations, marketing agencies, and commodity organizations?

In light of government inaction, isn’t it time some of these parties critically examine this and share their findings with farmers and with government.

While this column has been devoted to evaluation of CWB policy, there is a need for evaluation following any change made in business or government policy. I think back to all the programs that have come and gone in the 35-plus years I have been farming: Western grain stabilization, GRIP, NISA, CROW, AgriStability, and on and on.

How many programs have been touted as the solution to western grain farmers’ problems, yet have not met the targets of government or the needs of farmers. I have no doubt it will happen again unless we start holding government accountable.

We need to demand government follow the same strategic planning process that governments themselves, as well as the financial industry, demand of farmers.

Criteria for evaluation

Many questions need to be answered about the impacts of the privatization of the CWB on Western Canada. Here are just a few I would like to see definitive and fact-based answers to:

  • As a percentage of export prices, are farmers now earning more or less from the sale of wheat/barley?
  • Are farmers able to sell and move all the wheat/barley they want, when they want (considering Western Canada’s limited rail, limited commercial storage, and export sales timing)?
  • Has competition for buying wheat/barley from farmers increased across the Prairies?
  • Has there been increased value-adding of wheat/barley on the Prairies?
  • Have new grain companies/co-operatives/traders emerged in Western Canada?
  • Have new markets for western Canadian wheat/barley been developed (export, local)?
  • What has been the impact on sales and servicing of export markets?
  • Are traditional buyers accepting and satisfied with the change?
  • Have exports of wheat and barley to the U.S. increased?
  • What has been the impact on imports of U.S. wheat/barley into Canada?
  • Have the changes led to new wheat/barley varieties?
  • What has been the impact on quality of prairie wheat/barley?
  • What has been the impact on the transportation system (rail)?
  • What has been the impact on roads?
  • Has the change led to externalization of shipping costs?
  • What has been the impact of the change on demurrage charges?
  • What has been the impact on basis levels of wheat/barley?
  • What has been the impact on farm advocacy?
  • What has been the impact on ownership of the western Canadian grain industry (rail cars, elevators, terminals, Churchill)?
  • Has there been increased trading on ICE or other new methods of Canadian pricing/futures of wheat/barley?
  • Has the elimination of the monopoly increased the profitability of wheat and barley and in the importance of growing these crops in Western Canada?
  • Has the elimination of the monopoly of the CWB had an impact on the profitability and acreage of other crops in Western Canada?
  • Has there been an impact on farm size and number of farms in Western Canada?

Postscript: After I finished writing this column I have found out a research paper will soon be released which measures the impacts of CWB monopoly deregulation on malting barley production. While not the comprehensive impact study I am calling for, it at least is a partial evaluation. Unfortunately, it is not a Canadian government evaluation, or even by a Canadian researcher. It is a pending U.S. study.

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