The Canadian Wheat Board isn’t apologizing for its influence on value-added processing in Western Canada.
In fact, the president of the Canadian Wheat Board said the board is partly responsible for making value-added processing boom in the past decade.
“It is worth celebrating this success, as it is often lost in the political rhetoric we hear when this subject is discussed publicly,” said Greg Arason at the board’s Moving Up Market conference.
While the American flour milling industry has been stagnant and even declining, the Canadian industry has been bounding ahead. Arason said Canadian milling since 1992 has increased by 33.5 percent, while American milling has declined.
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About one third of the domestic milling is in Western Canada, which is double the percentage based in the Dakotas, Montana, Minnesota, Washington and Idaho.
“As an industry, we are justifiably proud of those comparisons.”
Canadian millers are also running at a higher utilization rate, meaning they are coming much closer to capacity than their less busy American rivals, Arason said.
Domestic and export malting production are also rapidly increasing, “in a global malt and malting barley market that has experienced slow growth overall.”
Pasta production is lagging in Canada, Arason said, but it is suffering in the United States as well.
He said the board plays a linchpin role in bringing together the various agencies, such as the Canadian International Grains Institute, the Canadian Grain Commission, the Canadian Malt Barley Technical Centre and industry groups.
The board can help develop and market new wheat and barley varieties, identify and develop new customers and keep existing customers happy, Arason said.
“The quality of raw materials they have to work with in Canada has given them a competitive edge in selling quality products into the U.S.”
Profitability required
He didn’t show much sympathy for farmer complaints that the board stands in the way of value-added processing development by refusing to grant exemptions from pooling to producers who want to set up their own facilities.
“Value-added is value-added only if it is profitable,” said Arason.
“And a sound business idea should only be pursued if a business plan put together with due diligence shows it to be viable in the current environment.
“Special deals just lead to special problems.”
Arason said some farmers who have said they want to set up processing plants are being unrealistic.
“I think some people underestimate how difficult it is to get into the value-added business, particularly in areas such as flour milling and pasta production,” said Arason. “It’s a tough business. It’s a low-margin, high-volume business.”
He said niche markets may be the best hope for market development, rather than for farmers to try to compete with Archer Daniels Midland and other multinational food companies.
