The February 1995 federal Liberal decision to kill the 98-year-old Crow subsidy on grain transportation changed attitudes and unleashed forces that will transform prairie agriculture.
It has forced farmers to reconsider cropping patterns, investment and the profit base of their farming business.
In this second special report on the fall-out of the end of the Crow, Ottawa-based national correspondent Barry Wilson looks at the corporate and political implications. It has become a promotion tool for the co-operative movement, a new pressure for elevator system consolidation and applied political pressure on the supply management system to move more production west.
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High Level, Alta. grain farmer and former Alberta Wheat Pool delegate William Fedyko knows it’s crazy.
On a late April afternoon, he trucked 428 tonnes of grain 480 kilometres past his local pool elevator to the pool terminal in Dawson Creek, B.C.
Because his grain company was offering a premium to deliver to Dawson Creek, Fedyko earned a net $1.37 per tonne more by shipping 480 km southwest than if he had delivered next door.
“That doesn’t make sense,” he said hours later. “But the trucks are available and anxious for business and the grain companies are into this competition thing.”
It is, he said, a symptom and symbol of the new age of deregulation on the Prairies.
The 1995 end of the Crow Benefit subsidy and the advent of cost-based transportation bills changed many grain industry assumptions.
Railways want to rip up low-revenue tracks, grain companies are closing small elevators while they embark on a terminal-building binge and farmer grain hauls grow by the year.
“The railways really are dictating the shape of the grain handling system of the future,” says former Alberta Wheat Pool president Doug Livingstone of Vermilion. “Companies are tearing down where they think the line won’t stay and building where they think it will.”
Fedyko worries that one symbol of the end of the Crow era could be an empty Alberta pool elevator in High Level, as far north as the grain belt goes.
“Once people like me start bypassing that local elevator, it becomes a habit and the town suffers,” he said.
Hundreds of kilometres southeast of that High Level elevator stands another structural symbol of the changed economics in the post-Crow era.
At Elie, Man., Prairie Flour Mills Ltd. started production this year after local farmers and other investors decided the end of the Crow subsidy on grain moving off the Prairies made western flour milling competitive again.
“We investigated a flour mill in the late 1980s but the economics just weren’t there,” said farmer Andreas Boersch, president of the small mill which started production in February.
Once the federal government announced the end of the Crow, they did their calculations again and decided it would work. Eastern mills no longer would get subsidized western wheat.
“When the Crow came off, everything changed,” he said. “We looked at it again and it made sense.”
Manitoba agriculture minister Harry Enns loves to point to the Elie flour mill as Manitoba’s post-Crow future.
“The first (prairie) flour mill in 45 years is being built … 40 miles from where we sit,” he told the Senate agriculture committee when it visited Winnipeg in April.
Enns said Ottawa must remove any barriers which exist to prairie processing. “I have attempted to make the broader case for Manitoba because of the impact of the loss of the Crow.”
No doubt, the end of the $540 million subsidy unleashed a change in prairie business thinking.
From hog processing to ethanol production, corporations have been announcing hundreds of millions of dollars worth of investment since 1995.
Ralph Goodale, federal agriculture minister when the Crow was killed, insists the decision attracted the investment.
“When you see what has happened since, in terms of agrifood investment, you would find one of the highest rates of investment in new diversified or value-added enterprises in history,” he said in an interview. “I do not believe that is a coincidence.”
Neither does Cargill president Kerry Hawkins.
Like other grain company executives, he predicts an unprecedented period of consolidation, terminal building and competition for farmer business.
“It was a turning point in having the industry see that change was possible and inevitable,” he said. “If the Crow could go, anything was possible.”
For Saskatchewan Wheat Pool president Leroy Larsen, it created more pressure for the company to invest in value-added processing and to abandon high-cost or remote elevators.
The pool will be investing close to $300 million in terminals.
“Throughout the prairie region, there is an accelerated consolidation of the system to accommodate the future,” Larsen said in his Regina office. “Paying the full freight and deregulating means you have to do things in the most efficient way possible.”
In the Calgary head offices of Canadian Pacific Railways, that means trying to dump higher-cost or lower-volume lines, pushing for more deregulation and promoting the idea that railways and grain companies are partners, not enemies.
“The end of the Crow has forced us all to change our thinking,” said CP vice-president Rick Sallee.
He imagines farmers hauling farther and the grain and rail companies collaborating to design the most cost-efficient system. “The fact that subsidies have ended and the farmer sees the full costs means he also will be pressuring for the lowest cost system.”
For rural politicians, corporate pressure for consolidation and efficiency means multi-million dollar pressure on rural roads.
And it leads 50-year-old Shaunavon, Sask., farmer Philip Lewans to wonder who the change was meant to benefit.
“Once changes like this start, they will continue,” he said last winter. “The grain companies, the railways will be the winners. The small communities will be the losers. Farmers will adapt, drive farther. The communities will be left behind.”
