Author of flawed paper backtracks on freight calculations

Industry officials take issue with methods and conclusions in report comparing CWB freight costs and those charged by private grain firms

The author of an academic paper on grain handling has acknowledged that her calculations on freight charges paid by the Canadian Wheat Board were inaccurate.

Laura Larsen, a doctoral candidate specializing in the history of the prairie grain trade, released a paper April 13 suggesting that western Canadian farmers are paying more money than ever to get their grain to market and are receiving smaller payments in return.

In her paper, entitled An Evaluation of the Present Situation for Western Canadian Grain Farmers within a Historical Context, Larsen stated that per-tonne freight costs incurred by the Canadian Wheat Board for moving prairie grain to market were consistently lower than per-tonne freight costs incurred by private grain handling companies.

On April 15, Larsen conceded that the comparisons were inaccurate.

“In undertaking more research into freight payments before and after the single-desk it has become apparent this is a very complex issue that would take considerable time to clarify,” Larsen wrote in an erratum. “Therefore I have decided to remove the section of the paper which makes reference to comparisons between freight payments.

“I deeply regret that the concerns raised over this section have overshadowed the rest of the paper.”

In her initial paper, Larsen said she used audited data from the Canadian Transportation Agency and the Canadian Wheat Board to conclude that CWB freight costs between Aug. 1, 2001 and July 31, 2012 — the last 11 years of single-desk selling — ranged from $9.35 per tonne in 2004-05 up to $19.48 per tonne in 2011-12.

By comparison, freight costs charged by the private grain trade during the same 11 year period ranged from a low of $47.36 per tonne in 2011-12 to a high of $120.22 per tonne in 2001-02.

“The CWB consistently has had a lower freight cost than the private trade and that’s in part because the private trade doesn’t have that market power to negotiate better freight rates,” Larsen said in a subsequent interview. “They’re negotiating as individual companies versus the CWB, which got to negotiate as a single-desk, handling the entire prairie crop.”

Larsen’s paper was commissioned by the Canadian Wheat Board Alliance, an organization that supports single-desk marketing and is currently lobbying Ottawa to resurrect the Canadian Wheat Board.

Larsen declined to provide details about the amount of compensation she received.

Contents of the paper were shared with the agricultural media in an April 13 conference call organized by the CWBA.

Larsen’s paper supported the assertion made by CWBA that western Canadian farmers were better off under a single-desk marketing system. However, her conclusions on freight costs and the methodology used prompted immediate criticism .

“I think there is a big issue with this report,” said Richard Gray, an agricultural economist from the University of Saskatchewan.

In an April 14 interview, Gray suggested that the numbers used in the paper present a misleading view of freight costs, both before and after the elimination of single desk marketing.

He also took exception to the fact that his name was included in a CWBA document that summarized the findings of Larsen’s paper.

Gray said he was not contacted by the CWBA before learning that his name had been included in the CWBA’s summary document.

“I certainly don’t endorse that attribution,” Gray said.

James Nolan, another U of S economist who was cited in Larsen’s paper and the CWBA summary document, also took issue with the freight comparisons.

“I have not had a lot of time to review the paper, but as a professional journal editor in the field of agricultural economics and transportation, a quick read leaves me quite concerned about her methods and conclusions,” Nolan said.

“Suffice it to say this research was not vetted by myself … nor am I aware of any professional colleague in an appropriate field who reviewed this paper prior to its release. Having the paper refereed or reviewed by appropriate experts before going public would seem a pretty obvious way to ensure no mistakes were made.”

Former Conservative agriculture minister Gerry Ritz also questioned the paper’s findings, saying the numbers presented were wrong.

“The problem with the whole thesis that Laura Larsen is putting out is that the foundation that she’s building it on is wrong,” said Ritz.

“She’s looking at the wheat board’s annual statements which … have never included the MRE (maximum revenue entitlement) covered lines, the freight rates that were set. “Those (freight costs) were always paid by the line companies and of course ultimately paid by the farmer in the bid price … but they were never, ever included in the freight titling under the wheat board.”

Ritz said the freight costs shown in CWB annual reports covered transportation costs other than domestic freight rates, which are regulated through the Maximum Revenue Entitlement (MRE) program.

Freight costs published in CWB annual reports never included the primary costs of moving so-called board grains from prairie delivery points to port terminals.

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