European Union – North America Farm MeetingNiagara Falls, ONOctober 20, 2009

Marketing systems and cooperatives The role of the farmer in the value chain

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Outline

• Collective marketing and cooperatives in Western Canada

• What is the Canadian Wheat Board?

• Benefits of an orderly marketing approach

• A history of trade challenges

• State Trading Enterprises at the WTO / December 2008 modalities

• What the future holds

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Collective marketing and cooperatives in Western Canada

• A movement going back to the pools in the early 1900’s

• Its popularity spread to many agricultural sectors in the 60’s and 70’s

• Marketing boards in the hog, dairy, poultry, horticultural industries resulted

• Purpose: to counteract the power that buyers held over individual primary producers because of:

– The perishable nature of food products– The small number of buyers– Producers’ need for cash flow– Seasonal variation in production

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What is the CWB?

• The only remaining collective marketing instrument for Prairie grain farmers.

• The exclusive marketing agent for western Canadian wheat and barley, both in the export and human consumption markets

• It exists to achieve the best possible returns for the total volume of grain that producers commit to the CWB’s marketing program

• Three pillars:– The single desk– Pooling– Government guarantees

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What is the CWB?

• It is not:– A marketing board– A crown corporation– A private grain company or

margin trader– A cooperative

• It is:– A single desk selling agent– A shared governance

corporation– Accountable to farmers– Accountable to Parliament

through the Minister responsible for the CWB

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Advantages of collective marketing

• Increased negotiating clout with customers and suppliers

• Ability to manage an effective pool

• Ability to capture the full benefits of market development activities

• Enhanced ability to service discriminating markets year-in, year-out

• Size, volume, resources to effectively lobby on producers’ behalf

There is strength in numbers.

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A history of trade challenges

• International competitors feel that the CWB provides an unfair advantage to the Canadian grain industry.

• In the past 20 years, 14 separate trade challenges have targeted the CWB

• All initiated by the U.S.• Challenges have been brought

before both domestic and international trade tribunals

• All tribunals have eventually ruled in Canada’s favour.

The CWB does not distort trade.

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State Trading Enterprises at the WTO talks

• In light of the lack of success in getting rid of the CWB under existing rules, focus has shifted to changing the rules.

• December 2008 modalities target the CWB.

• If accepted, they would eliminate the CWB’s monopoly powers by 2013.

• The modalities would not apply to any other STE (specific exemption for Zespri).

• There are no real benefits for Canadian grain producers in the current modalities.

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STEs at the WTO talks

• The federal government has already given up the guarantees on CWB borrowings and payments (July 2004).

• Overall, the deal currently on the table is not beneficial for western Canadian grain producers.

• The federal government has said publicly that it opposes elimination of the CWB’s monopoly powers in the Doha Round of WTO talks.

• It needs to back its public commitments with the same strong actions it has undertaken on behalf of the supply managed sectors.

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What the future holds

• International competitors are unlikely to stop working to eliminate the CWB.

• Consolidation in the grain industry is also likely to continue, making the need for cooperation and orderly marketing more acute.

• These forces are difficult to reconcile and will probably lead to further trade action.

• Clear rules and forceful defence of farmers’ rights are needed now and in the future.

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The future of collective marketing of agricultural products should be for producers to decide. It should not be in the hands of forces that stand to gain from its elimination.