Freight rate study favouring CWB draws fire

An academic paper on grain handling prepared by a doctoral candidate at the University of Saskatchewan has prompted an angry and confused response from grain industry experts who claim the paper has serious flaws.

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 argues 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.

Using audited data from the Canadian Transportation Agency and the Canadian Wheat Board, Larsen concludes 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 wheat board.

The CWBA paid Larsen for time spent researching the topic and preparing the report. However, Larsen declined to provide details about the amount of compensation received.

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

The conference call was chaired by Manitoba farmer Andrew Dennis, who is listed as a plaintiff in a class action lawsuit against Ottawa, seeking compensation for alleged monetary losses related to the elimination of single desk marketing.

Others who participated in the conference call included former CWB farmer directors Bill Woods, Kyle Korneychuck, Bill Nicholson and Bill Gehl.

Gehl currently serves as chair of the Saskatchewan Wheat Development Commission.

Larsen’s paper supports 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 she used has prompted concern among industry observers, including other academics familiar with prairie grain handling and transportation.

Richard Gray, an agricultural economist from the University of Saskatchewan, said he has serious issues about contents of Larsen’s paper.

“I think there is a big issue with this report,” he said.

In an April 14 interview, Gray suggested that the numbers used in the paper present a false and 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 or by Larsen before learning that his name had been included in the CWBA’s summary document.

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

“The study that I did looked at the impact of having insufficient grain handling and transportation capacity. It didn’t deal with the Canadian Wheat Board.”

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

“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 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 board grains from prairie delivery points to port terminals.

“Her numbers are completely skewed because even the foundation of her thesis is wrong.”

Ritz said the CWBA’s decision to commission a paper from a doctoral student was politically motivated.

“I think it’s all politically motivated when you look at who’s asking for this (paper),” he said.

CWBA’s Dennis described Larsen’s paper as a “historical overview of orderly marketing on the Prairies” that would allow the CWBA to compare the situation that farmers are currently facing with the historical record.

CWBA representatives said the paper’s findings would be shared with government officials in Ottawa in hopes that a Liberal government would consider reinstating a single desk marketing system.

“Since the removal of the Canadian Wheat Board in 2011-12, prairie grain farmers have gone from getting over 90 percent of the world grain price to the present level of between 40 and 60 percent,” Dennis said.

“It (the report) is just another tool we’re going to use in our lobby efforts, there’s no doubt about that,” added Korneychuk.

“They (Ottawa) know they have to do something. We just have to make sure that our lobby effort puts our option at the top of their list.”

Larsen declined to be interviewed on April 14 but said in an email that she is looking into concerns that have been raised about the paper’s freight numbers.

“I take this seriously and am looking into it,” the email said.

Visit www.cwbafacts.ca/cwba-research-paper-april-2016/ to view an online version of Larsen’s paper.

brian.cross@producer.com

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