The Canadian Wheat Board (CWB): Assessing the future of wheat marketing in Canada. - October 20th, 2011

03/14/25 • 49 min

Dr. Murray Fulton and Dr. Brady Deaton discuss the Canadian Wheat Board (CWB)

Transcript

Brady Deaton: Welcome to FARE Talk where we set out to provide enduring discussions on contemporary topics relevant to our economy with particular emphasis on food, agriculture and the environment. My name is Brady Deaton Jr. Of the Department of Food, Agriculture and Resource Economics at the University of Guelph. I'll be your host.

Today, Dr. Murray Fulton and I will be discussing what's going on with the Canadian Wheat Board. Murray is an agricultural economist and a professor in the Johnson-Shoyama Graduate School of Public Policy at the university of Saskatchewan. He has a long interest in Agricultural policy and in marketing systems. He is the co-author of a report by the Economic Council of Canada titled, Canadian Agricultural Policy and Prairie Agriculture, and has extensively studied the structure and behavior of the agricultural marketing systems.

Murray, thanks for being with us.

Murray Fulton: Oh it's a real pleasure.

Brady: Murray, what's going on. How do we start this. How do we start to understand what's going on with the Canadian Wheat Board. Keep in mind there'll be people tuning in who aren't aware of the current situation.

Murray: Good starting point Brady. Here's what's going on. What we're seeing in Canada over this next year, I mean, by next summer, we will have in place in Canada a completely different marketing system for wheat and that includes Durum and Barley for human consumption, malt and barley.

When I say a completely different system, I mean that in the strongest sense. What is happening is the replacement of a marketing system that, while it's evolved in some considerable ways, has retained the major fundamental structure that it acquired back in the 1930s and the 1940s. That's a mixture of an administrative and market system with Canadian Wheat Board playing a key role in that grain handling and transportation system for those grains, wheat and barley, in Western Canada.

What we're going to have by next July is some kind of much more market oriented system without the Wheat Board, at least without the Wheat Board as a compulsory marketing agency, which has been the case since the 1930s. There is still a question, I'll come to this at some point about whether or not a voluntary Wheat Board might be in place. But regardless of that central role, that the Canadian Wheat Board was playing, will no longer exist.

There is considerable discussion going on by farm organizations, the industry participants, these are the railways, the elevator companies, the millers, as to exactly what kind of rules are going to be put in place come next July and August.

Brady: All right. One of the terms that's often used this Single Desk Selling Authority. My understanding is that that ensures that the Canadian Wheat Board can basically purchase all of the wheat and barley for export or human consumption. Is that for all of Canada or just particular provinces.

Murray: The Wheat board only applies to the Western wheat growing area. This includes the grain growing areas in [inaudible 00:03:40] Saskatchewan, and Alberta and up into the Peace River area as well. Wheat growing in Ontario does not for instance, does not come under the auspices of the Canadian Wheat Board.

You're right the term that is used is the Single Desk Selling. This is actually key to that central role that the Canadian Wheat Board has been playing. Just very quickly what this Single Desk means is that all farmers in the [inaudible 00:04:14] Wheat Board area are required by legislation to deliver their wheat or durum or barley for human consumption to the Canadian Wheat Board. The Canadian Wheat Board then on behalf of the farmers then markets that grain, both domestically and internationally.

What the board then .... This is an additional element in its, it's not strictly connected with the Single Desk though it's grown up with it. What the Wheat Board has done for the most part then is take that grain, all the receipts from that grain that it sells and offers back to farmers a single pool price. All farmers, basis the export position get the same price. Regardless of whether the grain that the farmer delivered to the Canadian Wheat Board was sold in November at a particular price or in May at a different price or even sometime in the middle of July at perhaps at a third price, all farmers would get exactly the same price.

Now, what I need to say is that, that's adjusted, the price that an individual farmer will get will be adjusted for where that farmer is located in the grain growing region. The reason is that, off of that price that the Wheat Board provides, has to come the cost of grain transportation and grain handling. Depending upon where you are and the kinds of distance you are to port, or the degree of competition that the...

Dr. Murray Fulton and Dr. Brady Deaton discuss the Canadian Wheat Board (CWB)

Transcript

Murray, thanks for being with us.

Murray Fulton: Oh it's a real pleasure.

Previous Episode

The Origins, Nature, and Content of the Right to Property: Five Economic Solitudes - February 15th, 2012

Dr. Glenn Fox and Dr. Brady Deaton discuss Glenn's longstanding interest in property rights and his recent publication in the Canadian Journal of Agricultural Economics.

Transcript

Dr. Brady Deaton: Welcome to FARE Talk, where we set out to provide enduring discussions on contemporary topics relevant to our economy with particular emphasis on food, agriculture, and the environment. My name is Brady Deaton, Jr., of the Department of Food, Agriculture, and Resource Economics at The University of Guelph. I'll be your host. Today, Dr. Glen Fox and I will be discussing his long-standing interest and research on property rights. Glen is an agricultural economist at the University of Guelph. He was recently honored as a fellow of the Canadian Agriculture Economic Society and his fellow address, recently published in the Canadian Journal of Agriculture Economics. This address will be linked to this podcast. Glen, welcome to FARE Talk.

Dr. Glenn Fox: Thanks Brady.

Brady: In your paper, you point out the many long-standing controversies in agriculture and natural resource policies are really debates about the nature of property rights. That's the issue that I want to tackle in today's podcast, but before I do, I wonder if there's some kind of story or anecdote that you can give that kind of sets the stage for our listeners.

Glenn: I started working on this topic about 20 years ago, actually, Brady, with one of my master's students named Mike Ivy. And Mike and I were interested in a topic which had become sort of visible or had emerged in importance in the late 1980s, in the early 1990s on the question of when or under what circumstances does a regulation become so costly or so burdensome to a landowner to become the equivalent of a taking, to become tantamount to expropriation.

And so we started to read legal literature, economic literature, read some case law, and we very quickly were confronted with a paradox. And the paradox was that most of the literature, whether or it was being written by economists or by lawyers or by political scientists or ethicists, dealt with a small number of cases typically that had gone to the U.S. Supreme Court.

They used apparently the same words and concepts, but when they got to the punchline, this critical question, does regulation constitute a taking, the answers were all over the map. And we had a great deal of difficulty figuring out why when there's only so many cases and they appear to all be using the same words, that the interpretations or the conclusions could be so divergent.

And after staring at this for a while, we realized that there was something else behind the scenes. And the something else behind the scenes was that each of the authors was invoking a different theory of property rights. And initially we identified three different theories of property rights. Subsequently, we've refined that and now have a list of five theories of property rights that I think exist in work that economists do, but also that legal theorists do.

And the five are: classical liberalism, pragmatism, utilitarianism, legal positivism, and then modern libertarianism.

Brady: Now in the regulatory [inaudible 00:03:10] situations in the United States there's this reference to the Constitution. So, the Fifth Amendment of the Constitution. In the Canadian context, is there something like the Fifth Amendment there?

Glenn: That's a good point. The reason that this word "takings" came up, the reason it's in this literature is because of the one clause referred to as the "takings" clause in the Fifth Amendment to the U.S. Constitution. There is no equivalent to a "takings" clause in Canadian constitutional law. There is another paradox and this is still something that puzzles me today and I don't have a good answer to this is that while there is a "takings" clause in the U.S., there is not a "takings" clause in Canadian constitutional law. The practice has generally been in Canada, when regulations have been found to be excessively burdensome that property owners were compensated whereas the practice in the United States under "takings" clause has been generally that property owners have not been compensated when they've subject to certain types of regulations. So that's a bit of a mystery to me, but -

Brady: I mean I think one of the [00:04:18] in our area, one of the things you hear referenced a lot is this Crow rate subsidy. And that's an example of where farmers or landowners were ultimately compensated for the fact that their guarantee of basically lower shipping rates was taken away by an act. Is that something that comes up in your understanding of this topic and kind of contrasting the U.S. situation with Canada?

Glenn: I think that's a related development, but it's really somewhat different from the regulatory takings. In the case of the Crow rate, which were these grain transportation subsidies...

Next Episode

Understanding Rural Canada - Octoboer 19th, 2011

Ray Bollman discusses terms, trends, and policy issues relevant to understanding rural Canada.

Transcript

Brady Deaton: My guest today is Ray Bollman. He and I will be discussing issues related to rural Canada and policy. Ray has been the focal point in Statistics Canada for rural research and analysis since the 1990's. He initiated Statistics Canada's rural and small town Canada Analysis Bulletins in 1998 and there are 62 of these bulletins now available. We'll provide a URL to them on the website. Before his retirement, he was the Chief of the Rural Research Group at Statistics Canada. Hi Ray and welcome to FARE Talk.

Ray Bollman: Yeah, thanks for calling.

Brady: Ray, let me begin by asking you, how should we think about rural? What is rural?

Ray Bollman: Well different people, we do it differently. I'm an economist, so I would look at the price of rurality and I would look at distance, density and the distance to density. And that's sort of the way the World Bank Rural Development in 2009 on Reshaping Economic Geography clearly stated the issue of regional geography as in density and distance to density. And so density then is the advantages of glomerated economies and the distance to density, there's economic distance, price and time to get there, but there's social distance and psychological distance to density. So I look at it as distance in density.

Some people will talk about is as identity. So if you feel rural, even if you're living in a city, you might behave differently. I would say gee, you're facing the same relative prices in the city, whether you feel rural or not, so I don't think you'd behave differently. Maybe that's an empirical question.

Brady: So for some folks, when you talk about glomeration effects being associated with the density character of urban and then lower density in rural, what are we talking about? A glomeration effects occur in urbanized areas ...

Ray Bollman: It’s because it's a lower cost of people living together and working together. Firms, if they're beside each other, in much the same industry have lower cost because they have better access to specialized labor force. Their employees would go to the same church, or drink at the same bars, or curl at the same curling rinks, and over the conversation just exchange of tasset knowledge. They would just exchange tidbits on how things are done in their particular occupation or their particular industry. And if that firm was in a more remote area, that exchange of tasset knowledge's could not take place. You could read on the internet the written knowledge but the embedded or tasset knowledge that the specialized workers have, that they do not write down, just cannot be exchanged over the internet, you have to do that at the elbow of the master, if you will, and that's a big advantage of a glomerations and having both people and firms being close together.

Brady: So, I guess, part of the idea, is if you're in an urban area, if you take the same person, or the same firm, from a rural area and move them to an urban area, they may be more productive. Because of the exchange of this tasset knowledge and the interactions with experts in the area.

Ray Bollman: Yep.

Brady: Yeah.

Ray Bollman: Yep. More productive or lower cost unit output, same thing. That's right.

Brady: Okay so that's part of the density issue of rural. And the distance, can we think about that, and you mentioned this is cost, takes longer to transport good and information to rural areas.

Ray Bollman: Yeah, to rural areas and from rural areas. So in some sense, the high price distance is an advantage for some rural firms, cause they have a distance tariff and so you might be able to set up a business in a rural area because it's too expensive to import that service, or that facility, yeah that service from an urban area. So the distance is a nice tariff barrier. But the other side is, if you're producing something in a rural area, it's going to cost you something to ship it to the urban market. And it's going to cost you something that you're gonna have a harder time finding out how that niche, or that product, or that market, is developing and how you should change your product. If you're living in the middle of the market, you have an intuitive feel how that market is changing but if you're living away from the market and shipping it to that market, you have harder time just being with the market and I don't know ... what color you have to do, what your promotion should be, how fast you have to change your good or service. So it's just not being aware of the changing market if you're at a distance and so there's a bit of higher cost on the market research side.

Brady: Now I notice in a number of your writings, and we'll makes these available on our website, but you make the point, I think it's a really important one, that rural is not necessarily l...