Death of an old, absurd CWB myth, but perhaps the birth of a legitimate new hope

One of the silliest things argued by some during the height of the multi-year CWB battle was that a “strong and viable” (or variations to that effect) Canadian Wheat Board was possible without its marketing monopolies and without having grain elevators and terminals.

Some claimed the CWB, stripped of its ability to control access to Canadian wheat, durum and export barley, stripped of its ability to coordinate deliveries to port and operating without any grain-handling facilities, could “thrive” in a post-monopoly world because of its long experience and good relationships with overseas buyers. Some suggested the CWB’s sales people could just spin their rolodexes and whip up export grain sales, export grain sales that Canada’s grain companies would be only too delighted to assist.

No one I knew in the grain trade believed this bunkum. Everyone knew that the monopoly CWB’s marketing edge came from the market power the monopolies delivered. Without the marketing monopolies, it lost all its inherent edges and purpose. Sure, the grain companies would probably be willing to haul CWB-marketed grain to port, but at prices that would suck away any profits for the CWB. And without the ability to pull in grain from wherever that particular quality or type of crop was most plentiful, the non-monopoly CWB wouldn’t be able to offer the unchallenged quality and consistency that had always been its customer service edge.

Without the monopolies, the CWB was just another middleman, in an industry that was very quickly turfing all the middlemen and getting rid of inter-company trading.

And all this has now been amply proven. With the announcement that the Bunge-Saudi joint venture Global Grain Group was winning control of the CWB with a $250 million investment of contributed facilities and money to pay down the CWB’s capital spending, the myth that the CWB could go on as an asset-less marketer has finally been buried. This deal is all about steel and concrete, grain handling assets and the ability to own, move and export physical crops. The core function of the old CWB – marketing, customer satisfaction and other soft powers – is now definitely secondary to the all-important goal of building a bricks-and-mortar new grain company. The one thing remaining of the old CWB will be various farmer-focused elements, like pooling and farmer equity in the entity.

It was fitting to have federal agriculture minister Gerry Ritz make the G3-CWB announcement, because many of the people making the disingenuous or out-to-lunch claims that the CWB could survive without its monopolies and without facilities were big backers of the government’s plans to dismantle the old CWB. As Ritz shovelled dirt onto the coffin of that old myth last week, that chapter of rhetoric has hopefully also been buried – if not forgotten. To Ritz’s credit, once he was able to break the CWB’s monopoly powers he also ensured that the CWB could survive as some sort of entity with a possible future. He stepped in with a lot of money (he and the CWB estimate it was more than $300 million) to pay off old debts and cover legacy liabilities. That allowed the CWB to go out, borrow money and buy grain elevators, terminals and other physical assets. CWB president Ian White and his board and management team managed to quickly and deftly assemble a collection of disparate assets that have created the bare bones of this new company.

Those purchases were what the CWB needed to make in order to attract somebody like Bunge and get taken seriously as a player in the Western Canadian grain markets. All in all, it looks like a highly successful post-monopoly strategy in converting the CWB from being a marketing agency to becoming a real integrated grain company.

So the myth of the CWB being able to survive as a standalone, farmer-controlled marketing agency has been definitively buried, after appearing like one of the walking dead for a few years now. (It’s actually hard to recall that time and those suggestions.)

That leaves Prairie farmers with a new hope. We can forget all about the old CWB now and focus on the post-monopoly reality, which is massive concentration of power in the hands of two railways and three dominant grain companies. That’s not exactly a free market, when the costs for entry for any new railway or grain company are sky-high and practically impossible to meet. But the addition of a new player – Bunge – in the grain-handling business, combining its and the CWB’s facilities and building lots more (we assume) is the best hope we can have for increasing competition in the Prairie grain business. No one is likely to come in and build an entire new major grain company from scratch, but this Bunge-CWB combo could give birth to a solid new competitor to the rest of the industry and give farmers a better chance of finding aggressive bidding for their crops.

Rhetoric about the CWB has hit reality, but the reality now is a lot better than it could have been if the old CWB had just dried up and blown away.

The old CWB is long dead, the myth of its possible future as a marketing agency is now buried, but farmers got a serious new grain company out of the deal, so following loss there is also hope for hope.



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