When Richard Wright sits down with farmers to discuss hog barns, the debate often turns to the Canadian Wheat Board.
There are always some farmers who want the board’s export marketing monopoly to remain but others around the table feel the board has outlived its usefulness.
“The same thing is happening here,” said Wright, referring to the hog industry that is governed in most provinces by single-desk marketing boards.
“People in the know, they will agree something dramatic has to change. It’s time for marketing boards to change or step aside.”
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Wright is co-owner and general manager of Quadra Management, a Saskatchewan company that owns no hogs but has one-tenth of the province’s production under its marketing and management umbrella.
“It boils down to survival, period.”
For opponents of Wright’s open market solution, it is as much a matter of power as survival.
They see the system he would build as one in which multinational processors and large producers have the market power. The smaller producer, who traditionally looked to the marketing board for market power, would be the loser.
Wright’s dual market vision has some powerful supporters.
The Manitoba government has decided to break the monopoly of the producer marketing board effective July 1, despite producer protests. The issue is being debated in Alberta.
Jim Morris, general manager of producer-owned SPI Marketing Group in Saskatchewan, has a different view. He supports producer-controlled boards and thinks he knows why their enemies want them destroyed.
The packing industry wants to eliminate the bargaining power of the boards, leaving them to deal with individual producers, he said.
Provincial governments imagine the end of the boards will mean investment.
“Somehow, they feel if they destroy the producer marketing system, it will cause someone to come and build a packing plant,” he said. “And a few producers are naive enough to believe the world is waiting for them.”
Morris argues the hog industry is being damaged because of the uncertainty over how markets will work in the future.
“When the industry focuses on how to grow and capture new markets, it’s busy ripping itself apart.”
Back on the side of the open market system, Wright estimates his interests lose at least $5 for each hog marketed when they sell through SPI, the province’s sole hog marketing agency. That adds up to about $65,000 a year for the hogs under their management.
“When we deliver hogs to Intercon, a $5 bill drops on the ground.”
Intercon, or Intercontinental Packers in Saskatoon, is one of two main hog packing plants in Saskatchewan. The other is Moose Jaw Packers, SPI’s own packing plant.
It is the same in most other provinces. The producers deliver their hogs to the provincial marketing agency, which in turn sells to the packing plants in the province.
Some farmers feel they could grab a higher price if they could make their own deals with the plants and find their own markets.
But Peter Volk, chair of Saskatchewan’s marketing agency, said recent high prices have all but ended talk of creating a dual market in the province.
Meanwhile, Alberta producers have been grappling with the idea of dual marketing for more than a year.
Last year, Alberta’s hog marketer, Alberta Pork Producers Development Corporation, surveyed 408 members. It showed producers were split on the idea, roughly 44 percent on either side of the marketing board monopoly issue.
While some producers were intrigued with the idea of a dual market, the board didn’t think it would be fair to ask producers to vote without knowing how a dual market would work, said Paul Allers, a Strome pork producer and marketing board director.
“It’s been 26 years since we’ve had an open market. It’s unfair to ask for a vote when you don’t know what it looks like.”
A marketing options committee was formed and three directors and delegates began working with the provincial marketing council to design an open market proposal.
“We hope to have something to take to producers in June,” said Alberta pork producer chair Roger Charbonneau of St. Lina.
Support for a strong agency
While Charbonneau was reluctant to discuss details of the proposal, he said a recent marketing agency vote showed good hog producer support for maintaining a “strong agency.”
He also said provincial agriculture minister Walter Paszkowski seems determined “Alberta will join Manitoba in open marketing.” There is no guarantee farmers will get a vote.
“As chairman of the board. I want the producers to have the final say,” said Charbonneau. “But government and the marketing council have ultimate power in the province … . They can do what Manitoba did if they wanted.”
Paszkowski said it was too soon to say if there would be a plebiscite.
“They’re developing the plan, not government,” said the minister, who insisted on a farmer vote on grain marketing. “It would be highly unfair to say if a plebiscite will take place.”
In Manitoba, the government decided the province could not attract large processing firms while the board’s monopoly remained.
“There needed to be some flexibility for the processing industry,” said Gerry Moore of Winnipeg, a Manitoba Agriculture official and co-author of a report recommending the elimination of the board.
“If investors are going to expand, they don’t want to be short of product.”
They felt processors couldn’t develop markets when they didn’t have a clear idea of the quality of hogs they were getting each week from the board.
“We looked at what we have to do to be competitive five and 10 years down the road,” said Moore. “It’s revolution not evolution.”
Wheat, hog debates differ
The debates over single-desk selling for grain and hogs cannot be compared, says an economist who has studied both issues.
Daryl Kraft, an agricultural economist at the University of Manitoba, says proponents of breaking the sales monopoly in the two commodities have different goals.
Opponents of the Canadian Wheat Board export monopoly want the ability to compete in international markets where they believe the board is not doing a good enough job. It is not a domestic sales issue.
By contrast, dual market supporters in the hog industry believe that by getting rid of the marketing board monopoly, they will be able to attract the multinational companies to compete for their hogs, giving them a domestic option.
“In order to penetrate the world market, there needs to be a major processing industry,” said Kraft, who was part of a transition team to help smooth the Manitoba change from a monopoly board to an open market. “That’s where dual marketing is coming from.”
He said big hog industry players like IBP and Cargill want the power to deal with competing sellers before they will invest in a province like Manitoba. “I think they are reluctant to invest in a situation like Canada where they must negotiate with a single-desk seller.”
On July 1, the dual market advocates in Manitoba get their wish. Over the objections of many hog producers, the government has removed the monopoly of the marketing agency.
Kraft says it is an experiment that will take several years to prove itself.
It is up to the large processors to invest and to prove that deregulation is good for farmers, he said.
U.S. example causes environmental concern
Some hog producers may favor dual marketing options for their product but Alberta hog producer Jim Smith is not one of them.
Eliminating the marketing boards would mean creating a North Carolina-style industry, he says.
There is no marketing board in that state, but neither are there health or environmental regulations, said Smith of Innisfail, Alta.
“They’re in a cesspool of hog manure,” said Smith, a Canadian Pork Council director.
To attract business, North Carolina eliminated any regulations that may hamper production, he said.
Hog production in North Carolina has increased 40 percent but at what price, Smith wondered.
The Quebec Pork Producers have just completed a report on the North Carolina hog industry and confirmed Smith’s worries.
“There’s real problems down there,” said Gilbert Lavoie, marketing adviser for the Quebec agency.
Multinational companies moved into the state that had plenty of cheap feed, excess cotton and tobacco laborers and few regulations.
Now, soil maps show an excess of nitrogen, phosphorus, copper and zinc in the soils. A 225,000 litre manure spill into a river created more environmental concerns, said Lavoie.
Smith is not sure how far provincial governments will go to attract large processors into the province.
“They expect if single-desk selling were abolished, some U.S. interest would come in and double our production. Time will determine whether that will happen.”
It is an idea supported by larger hog operations which feel badly served.
But Marilyn Jonas, a member of Saskatchewan Agriculture’s Pork Implementation Team, thinks part of the problem between large producers and boards is poor communication.
“People are becoming more sophisticated and marketing issues are coming to the forefront,” she said.
Marketing boards should look at their operation and decide if they are doing the best for the producer and explaining their service.
“In many cases that can be the problem,” Jonas said.
