Manitoba’s agriculture minister said his government will reconsider its support for the Canadian Wheat Board’s monopoly if it doesn’t change the way it prices wheat for value-added projects.
Harry Enns says he’s not threatening the wheat board, but rather encouraging officials to look at how its domestic pricing policy affects efforts like a new flour mill planned west of Winnipeg.
Enns said since the loss of the rail transportation subsidy, farmers in the province pay the most freight to ship grain to export points.
Farmers are willing to buy their grain back from the board for projects, he said, but the complex pricing formula gives others an advantage.
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Different prices
“Our grain ends up costing less to somebody that wants to mill flour in Calgary than it does here in Winnipeg, and that’s not acceptable to us,” Enns said.
A group of farmers and investors said last week it was close to announcing plans to build a commercial flour mill near Elie, Man., about 20 kilometres west of Winnipeg.
Brigitte Leitgeb, a farmer involved with the project, said it will be the first new flour mill built on the Prairies in 30 years.
The mill is expected to use about 35,000 tonnes of wheat per year to produce 90 tonnes of flour a day, and will serve Manitoba and Ontario markets.
Enns warned if the wheat board can’t improve its domestic pricing policies, “the kind of support in Manitoba that we have to date shown and continue to show to the Canadian Wheat Board could change.”
An assistant deputy minister with the Manitoba agriculture department explained a Calgary mill pays 86 cents per tonne more for wheat than a Winnipeg mill.
But Craig Lee said producers near Winnipeg receive $7.31 per tonne less than their Calgary counterparts. He said the lower prices for farmers wouldn’t be passed along to value-added activities in the province.
But a wheat board spokesperson said comparing the two prices is difficult.
Mills pay a price based on Minneapolis Grain Exchange futures prices, minus freight to their location, said Earl Geddes.
Manitoba farmers delivering to a domestic mill don’t pay freight to Thunder Bay, although the grain is priced relative to the export point, he explained.
The grain is worth more when it’s at Thunder Bay because it’s closer to end users, he said.
Freight is taken off farmers’ initial payment, but when farmers buy back their grain, the freight is deducted from the cost.
Geddes said the wheat board has been negotiating with the milling industry on changes to its pricing policy to reflect the way the loss of the subsidy alters the value of grain on the Prairies.
He noted domestic millers pay a premium for the 2.5 million tonnes of wheat per year they use, and don’t tie up the transportation system.
“You can’t just snap your fingers with your second-largest customer and say, ‘Sorry, we’re going to change your relationship with your mills’,” Geddes explained.
He said the board hopes to have a new pricing policy soon to make sure millers can make decisions based on a visible North American price for wheat.
“It will be the way it would be almost without the wheat board in place,” Geddes said.
He added the board has explained what’s happening to the Manitoba government and groups planning to build flour mills.
And while Manitoba flour mills won’t likely end up with a disproportionately low price compared to other mills, Geddes said he hopes the new policy will address the government’s concerns.
“If the Manitoba government is looking for subsidized flour mills, it won’t happen out of the Canadian Wheat Board’s pricing mechanism.”
