PRINCE ALBERT, Sask. – Claims that the single desk selling system undermines value-added processing are based on politics, not facts, says a senior official with the Canadian Wheat Board.
Some critics of the CWB say the board is an impediment to the development of value-added industries like flour milling.
They say a shift to a dual or open market would result in a wave of new wheat processing plants opening across the Prairies.
But Jim Thompson, the board’s marketing manager for North American markets, said value-added processing is driven by demand and has nothing to do with the grain marketing system in place.
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“In my mind, value-added has become the crutch to promote open and dual markets,” he said in an interview after speaking to farmers attending a CWB corporate accountability meeting Feb. 19.
“If you want to have that debate, then go for it, but don’t lay it at the feet of value-added processing.”
He said interest groups opposed to single desk selling either misunderstand or “deliberately misuse” statistics about value-added processing to promote their case for an open market or dual market, in which the wheat board competes alongside private companies in the open market.
“The idea that a dual market will lead to an explosion in value-added is just not true,” he said.
Thompson told about 40 farmers in attendance that the wheat processing industry has fared better in Western Canada under the CWB system than in the unregulated open market environment across the border in the northern wheat-growing states.
He presented them with an array of tables, graphs, charts and statistics.
For example, 32 percent of Canada’s total milling capacity is located in Western Canada, most of that in the three prairie provinces. By contrast, slightly more than 15 percent of the total U.S. milling capacity is located in what are considered the six northern tier states of Minnesota, North Dakota, South Dakota, Montana, Idaho and Washington.
He said the numbers also show the flour milling industry in general is in better shape in Canada than the U.S.
Milling capacity growth in this country has increased by 34 percent since 1991, while in the U.S. the capacity has increased by 16 percent.
And while Canadian millers grind a little less than 3.8 bu. of wheat per capita, up from about 3.2 bu. in 1991, their American counterparts grind about 3.1 bushels, reflecting a slight decline during that same period.
Thompson said it’s frustrating to hear so many myths and misconceptions about value-added from people who have an axe to grind against the CWB.
He said the problem may date back to the elimination of subsidized rail freight rates, when government led farmers and others to believe that getting rid of the subsidized rate would lead to an explosion of value-added processing, including flour milling, across Western Canada.
But that ignored the reality of the flour milling industry, which is driven by demand.
The only ways to increase demand are through population growth, an increase in per capita consumption, the development of new products or export sales, and that’s true whether there is a single desk seller or an open market.
“The marketing system is irrelevant,” he said.
Flour mills can choose whether to set up shop at “origin” or at “destination.” The former means locating close to the raw material, the latter means locating close to the customer.
While each has its own advantages in terms of costs, inventory control and customer service, the trend for the past 30 years has been toward destination mills, and Thompson said there’s reason to believe that’s about to change.
“The reality is that flour mills just aren’t going to locate in small town Saskatchewan,” he said. “It’s just not going to happen.”
As for the board’s pricing policies for value added processors, Thompson said the rules are the same for everyone, adding the board won’t make special deals for processors that will result in lower net returns for wheat producers.
