Australia’s single desk grain marketing system puts an extra $13 a tonne into the pockets of that country’s wheat growers, according to a recent study commissioned by AWB International.
Dismantling the export monopoly and allowing other exporters to sell Australian wheat on world markets would reduce wheat growers’ annual income by more than $500 million a year, according to the study.
Australian and Canadian dollars trade roughly at par.
“We view this document as a powerful demonstration of the real and tangible benefits delivered to growers, regional communities and the national economy,” said AWB chair Brendan Stewart, whose publicly traded company succeeded the Australian Wheat Board as that country’s single desk wheat seller in 1999.
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Canadian Wheat Board chair Ken Ritter said he isn’t surprised by the results of the Australian study.
“The finding of $13 a tonne is amazingly close to where we see our numbers,” he said.
The CWB also tracks premiums gained by single desk selling but doesn’t release the numbers, saying the information could adversely affect its marketing efforts.
Al Loyns, a retired agricultural economist from the University of Manitoba, has published a number of studies about markets and prices under the CWB.
He said studies that assess the value of single desk systems must take into account the cost side of the balance sheet.
Previous studies in Canada have focused on the port price, not the farmgate price, he said, and a premium price at port doesn’t translate to a better price for farmers if it is eaten up by handling, transportation, administrative and opportunity costs associated with a single desk system.
“Price is not what the issue is about,” he said.
“Net return to producers is what the issue ought to be about. That’s what has to be analyzed and they’re not the same thing.”
An independent team of four academics and economists, along with a leading Australian economic consulting company, prepared the report for AWB.
Among its conclusions:
- AWB and the single desk have captured price premiums across nine separate grades since 1996.
- On the AWB’s benchmark grade, the premium ranged from $15-$30 a tonne, depending on the model used.
- The average annual premium of $13 a tonne for all grades works out to about $250 million in additional income for the 2003-04 crop.
- The net benefit of the single desk to the Australian economy is calculated at $50 million annually.
- Abolishing the single desk would lead to a reduction in growers’ returns of $470 to $736 million.
A recent survey showed that 85 percent of Australian wheat growers rate the single desk as “very important” and a good system for exporting Australian wheat.
The CWB also tracks premiums Canadian farmers receive from the single desk.
The original study in this tracking released in February 2002 found the CWB’s single desk selling powers on western grown wheat and barley exports provided farmers with an average premium of $10.49 a tonne, or about $160 million on that year’s 15 million tonne wheat crop.
Ritter said no matter the numbers gathered by the board, they’d be unlikely to convince the board’s critics of the value of the single desk.
“It doesn’t matter how many PhD economists look at an issue, the critics will find a single point comparison somewhere in the world where things are different and then that’s gospel,” he said.
A 1996 study by economists Daryl Kraft, Hartley Furtan and Ed Tyrchniewicz found that the board garnered premiums averaging $13.35 per tonne between 1980 and 1994.
In a study done that year for the Alberta government, Loyns and fellow economist Colin Carter said there was no evidence of a farmgate premium for Canadian wheat and barley sales.
It said the single desk carried with it additional costs of up to $20 a tonne for wheat, along with taxpayer costs of $5 to $6 a tonne, negating any premium received in the world market.
