The Estey report is rife with mistakes, misunderstandings and misconceptions, says the Canadian Wheat Board, and implementing it would be a disaster for both the board and prairie farmers.
“Some of the recommendations have the potential to significantly increase costs to farmers and reduce the ability of all grain marketers to meet their customers’ needs,” the board said in a submission to transport minister David Collenette. “It is clear that (his) recommendations would in fact negatively impact the CWB’s ability to fulfill its mandate.”
The board’s 17-page response to the grain handling and transportation report by former Supreme Court justice Willard Estey constitutes a blistering critique of both the report and the author.
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It accuses Estey of misunderstanding the CWB’s role as a commercial grain marketing organization and of ignoring the needs of Canada’s grain customers.
It says Estey is confused about some existing rules and regulations and entirely misses the point on railway competition and pricing issues.
It says the report’s recommendations indicate that Estey’s objective was to design a system that would meet the needs of the railways and grain company shareholders, rather than producers.
It says Estey went outside his mandate by commenting on the board’s status as the single-desk seller of export wheat and barley, and criticizes him for focussing on the CWB while ignoring performance problems in the non-board sector.
It cites a number of factual errors in the report and it says the 30,000-word document fails to provide any data or research to back up many of its key recommendations.
“There is no analysis of current system performance and no economic analysis of the impact of removing the CWB from the country,” said the wheat board.
“Mr. Estey appears to have worked solely from discussions with review participants, particularly the railways. This lack of analysis calls his recommendations into question.”
The board’s submission even includes a review of a radio interview conducted by Estey in which he made what the board calls “erroneous and damaging” statements about the board’s role in transportation.
Wheat board director Ian McCreary, chair of the CWB committee that studied the Estey report, said it would be “virtually impossible” for the board to do its job on behalf of farmers if Estey’s major recommendations are implemented.
Making the board a port buyer would cripple the agency’s ability to make spot sales, would greatly reduce its competitive advantage in making long-term forward sales, would result in higher costs to farmers due to increased marketing risks, would transfer the benefits of terminal blending from farmers to grain companies, and would end the board’s ability to minimize transportation costs based on its knowledge of inventories and future sales.
Ending the maximum freight rate cap will lead to higher freight rates and give the railways control over the future shape of the branch line network.
“There are a lot of implications in that report that are negative to farm income,” said McCreary. “It’s apparent to me the farm voice was not well heard in the review process.”
The board report also rejects Estey’s suggestion that the CWB is already easing its way out of transportation through such operational policies as zone-based allocation of rail cars, which gives more control over car placement to grain companies, and issuing transportation tenders for malting barley.
Those changes, which were designed to give the grain companies more operating flexibility, are a long way from removing the board completely from country grain movement, the agency said.
The board said some of the proposals contained in the report could be beneficial for farmers, such as eliminating the railways’ right of first refusal on the sale of government hopper cars, making more use of the St. Lawrence Seaway and port of Churchill, retaining farmers’ right to load producers, strengthening the Canadian Transportation Agency and preventing the piecemeal sale of branch lines.
But it said many of those positive ideas would be undermined by other recommendations in the report.
For example, giving producers the right to ship producer cars may be irrelevant if the board is taken out of transportation and farmers have to tender for car supply, and if the maximum freight cap is removed and the railways are allowed to charge higher rates for single car loadings.
Aside from its response to Estey, the board is preparing its own report describing its vision of how the grain handling and transportation system could be improved to benefit prairie farmers.
A board spokesperson said that report could be released following the next board of directors meeting in the first week of March.
