So Edwin, How Does the Canadian Wheat Board work?

Brendaren Farms - Sunday, November 3, 2002 - by: Edwin Wallace


A friend and I were having coffee this afternoon and the Canadian Wheat Board came up. He comes from a farming family and we were talking about the fact that the CWB controls pricing on wheat grown in Canada. Sorry to lay this on you, but I told my bud,


"If Edwin don't know then there more then likely is not an answer."




This is a misconception. World prices dictate the price the CWB will realize in any given crop year.




The initial price for wheat and barley is announced prior to a new crop year. This price is based on the CWB's very thorough knowledge of what can be expected of world prices over twelve months. The initial price is lower than what farmers will receive in total for their production in that year. There is good reason for this. The government of Canada guarantees the CWB that if prices fall below the initial price it will cover the difference in order to guarantee that farmers get paid at least that announced amount. I guess this happened once or twice away back when but it is not of my life's experience.




This is how it works in a nutshell.




I along with all other wheat and barley producers 'pool' our grain with the CWB. The CWB then becomes a 'single desk' player in the world market. It has a good idea about the quantity and quality of grain which will be delivered to it. With that information its very sophisticated sales people go out into the world and sell our pooled grain for the very best price possible taking into account all the very complex issues surrounding the sale of grain at any given time - this can range anywhere from what ocean going freight rates are to credit arrangements to grades etc.




So, it is not me competing with Joe down the road or Cargil competing with the Saskatchewan Wheat Pool - we know we have the best people selling our grain - and there is nobody FROM HOME undercutting our price just to make a sale.




Part of the sales effort is to go to millers the world over and actually demonstrate the baking qualities of our grain. Or, to invite them to Winnipeg to the Canadian Grains Institute to see everything from specialty breads to beer produced from our very good quality Canadian wheat and barley.



7¢ a

I just wish people could see how sophisticated and competent the staff of the CWB is. And for such a low total cost to us producers. We, the producers, pay all the costs of administration and sales (The total operation of the CWB!). Last Crop Year, it cost me about 7¢ a bushel for all this help! That is the very least cost and very best value of anything I buy for my farm. (It could be more this year because of reduced production on the prairies.)




Finally, if the price of grain on the world market improves over the crop year we may receive what is called an interim payment on grain we have delivered. This past year we received several. At the end of the year the total value of sales less the cost of operating less any payments (initial and interim) is calculated to give us what is known as a 'final payment' which is paid in the first week of January. With that the crop year's pool accounts are closed and we are off on another year. (In actual fact that already started back on the first of August.
Question 1: Is the CWB just for western Canada?
  The prairie provinces and parts of BC
Question 2: Would you know where to find the profits of the CWB? I looked and searched the site nothing came up. We are not sure if it's just a governing body or if it's like a broker.


No profits accrue to the CWB. I as a grain producer might make some profit if the CWB does well in the world market. You say broker, but the concept of a 'single desk' seller of our pooled production is a very important concept that once understood, makes very good sense. So good in fact that guys like Ken Ritter, Chairman of the Board and directors like Flaman have done a 180 in their thinking about the CWB once they learned how it really worked.




As you might expect, the 'pooling' thing is complicated, but I have given you the barebones of how it works. Critics find the idea of such cooperation among producers - backed by legislation - to fly in the face of open competition where the sleekest, smartest, crookedest SOB can always take and occasionally get an advantage. I believe I and my neighbors deserve better.

Edwin Wallace



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