The Canadian Wheat Board
The history of the Canadian Wheat Board is grounded in the experience of farmers prior to World War I. Many farmers at the time felt captive to the railways, the line elevator companies, and the Winnipeg Grain Exchange for the delivery, weighing, grading, and pricing of their grain. They wanted greater power and protection for themselves in the grain marketing system. They developed a strong confidence in cooperative strategies and government intervention for addressing their needs and therefore established the Grain Growers’ Grain Company in 1905 and put pressure on the provincial governments to establish provincially owned elevator companies in subsequent years. As well, farmers pressured the federal government to pass the Canada Grain Act in 1912 establishing the Canadian Grain Commission as the official weigher and inspector of grain.
During the First World War the federal government was eventually forced by wartime conditions to become directly involved in grain marketing by establishing a body called the “Board of Grain Supervisors “ (BGS) for the 1917-18 and 1918-19 crop years. Wheat futures trading in Winnipeg was suspended in 1917 and the BGS assumed complete control over the purchase, sale and pricing of wheat for export.
After the war the federal government replaced the BGS with the first Canadian Wheat Board (CWB) to market the 1919-wheat crop. The CWB’s mandate was to sell wheat in domestic and export markets at prices in accordance with world levels. This meant that the Board could not determine the final value of wheat marketed on behalf of producers and the returns due to them until its sales for the entire crop year had been completed.
To deal with this uncertainty, the CWB implemented a two-payment system. Producers were first given an initial, or part payment when they delivered their wheat to elevators, and a final payment at the end of the marketing year once the financial results of the sale of the 1919 wheat crop were known. The initial payment was, in effect, a floor price guaranteed by the federal government and any deficit was to be absorbed by the government.
The CWB of 1919-1920, like the BGS before it, was seen as an extraordinary measure by both the federal government and its political supporters in the Canadian grain trade. It was felt that the CWB could not be justified as a permanent marketing arrangement under peacetime conditions, so it was disbanded in 1920 after one year’s operation. However, in this one year the concept had gained widespread support among farmers and farm organizations throughout Western Canada. These organizations opposed the abandonment of the CWB in 1920 and began immediately to press the government to re-establish it. When the government refused to do this, farmers took action of their own and created “Wheat Pools” in each of the three Prairie Provinces in 1923. The Pools also set up their own jointly owned Central Selling Agency for wheat and their system of payments for wheat deliveries was similar to that established under the 1919-20 Wheat Board.
The Pools operated well for several years, but the federal government was once again forced to intervene in grain marketing after the collapse of international wheat prices in 1929 and the onset of the Great Depression. Wheat market prices fell to such low levels that the Wheat Pools could no longer hope to recover from the market what they had paid out in initial payments for the harvest of 1929, and were facing bankruptcy. From 1930 onward, the federal government had to step in and provide the bankers of the Wheat Pools with a federal guarantee on their loans to the Wheat Pools, and had to guarantee the Pools’ initial payments to farmers. In this situation, it decided to put its own representative in place as the general manager of the Central Selling Agency. In the early 1930s the federal government still hoped that its involvement in grain marketing would be temporary and that it would be able to extricate itself from this in time and return all grain-marketing activities to the private sector. When it became clear by 1935 that its involvement was going to be longer-term than originally envisaged, it decided to formalize that involvement and enact the Canadian Wheat Board Act, which was signed into law on July 5, 1935. As with the 1919 Wheat Board, any losses incurred by the new CWB on its operations were to be absorbed by the federal government and any profits were to be returned to producers who delivered wheat to the CWB.
Over the years, the CWB’s authority over the marketing of types of grain has varied considerably. At first, deliveries to the CWB were voluntary, and it handled only wheat. Then, during World War II, the CWB was empowered to market all Canadian grains, including oilseeds and Ontario corn. Wheat futures trading was suspended in 1943 under wartime conditions and deliveries to the CWB became compulsory.
In 1949, Parliament amended the Canadian Wheat Board Act to extend the CWB’s marketing responsibility to encompass oats and barley, but retained a clause that required the Act’s renewal by Parliament every five years. In 1966, this clause was removed and the Act became permanent legislation. In 1974, inter-provincial sales of wheat, oats and barley for use in animal feeds within Canada were removed from the sole authority of the CWB. In 1989, the marketing of oats was also removed from the authority of the CWB, leaving it responsible only for the marketing of wheat and barley both for export and for domestic human consumption.
The operations of the CWB in the 1940s marked the transition of the newborn agency from voluntary marketer to monopoly board. Out of the necessity created by wartime economic conditions, the CWB assumed many powers during a tumultuous period for Canadian agriculture. The Second World War changed the grain marketing picture for Canada considerably. Canada’s primary grain markets at that time were in Western Europe. The German invasion and occupation, leaving the United Kingdom the sole Western European outlet for Canadian grain cut off almost all of those markets.
At the same time, the CWB was drawn into the government’s wartime price controls policy as the administrator of the maximum price provisions on grains. Beginning August 1, 1942, it was responsible for handling the government account for existing flaxseed stocks and thereafter the CWB was the sole buyer of flaxseed. It was also empowered to purchase soybeans at a fixed price for the account of the wartime Prices and Trade Board. Rapeseed was a virtually unknown crop in Western Canada early in 1943, but its oil was needed for the war effort. The CWB was persuaded to act as an agent of the Prices and Trade Board in accepting delivery of this oilseed and its production increased over the next five years.
War rapidly changed the demand for grain from Canada and affected the grain markets in the early 1940s. The United States, now the world’s largest grain exporter, was actually Western Canada’s biggest customer for wheat and feed grains in this period. Along with an increased demand for wheat in Britain and North America came escalating wheat prices on the American and Canadian grain futures markets. The Canadian government was committed to a policy of price control during the war years and the rising wheat prices created new problems for this policy and for its desire to provide food aid to its European allies. The CWB, still a voluntary agency, could not source wheat in a rising market since Prairie farmers were more inclined to deliver their wheat for the higher spot market prices offered by the private traders than for the CWB’s initial payments. Canadian commitments to deliver wheat to its allies were put in jeopardy. It became obvious that some action would have to be taken to secure wheat supply to meet wartime obligations. In September 1943 the federal government halted wheat futures trading on the Winnipeg Grain Exchange and made the CWB the sole authorized receiver and monopoly marketer of western Canadian wheat.
Following the end of the Second World War, the Canadian government signed a five-year supply agreement for wheat with the British government to secure some stability in wheat prices. It was felt prudent to maintain the CWB as a monopoly-marketing agency to execute this agreement. Canadian farm leaders and their organizations and a large majority of Prairie grain farmers were supportive of the CWB marketing system. This was confirmed at least partly by a plebiscite on CWB marketing of barley and oats in 1951 in Manitoba. A total of 31,000 of 35,000 farmers (89%) voted “yes” to continuing to have their barley and oats marketed under the monopoly of the CWB.
To fulfill the various duties that it had acquired during the war years, the staff of the CWB had grown rapidly. From a staff of 35 at the outbreak of the war, the CWB personnel grew to over 700 in 1946. By the beginning of the 1950’s, the CWB was a much larger and very different organization than the one which had come into being in 1935. Today there are about 500 staff in Winnipeg, Vancouver, Tokyo and Beijing offices, including regional offices across the Prairies.
The decade of the Fifties marked the return of the United States as a major exporter in the world grain market. During the Second World War, the U.S. had concentrated mainly on supplying its own domestic grain market. After the war, there were severe shortages of grain stocks in liberated countries around the world and the United States was unable to meet demand. At first, Canada filled the gap, but drought conditions reduced Canadian grain output from 1946-50, and a surge in world demand quickly depleted stocks.
In response to customers’ wishes in the early 1960’s, the CWB started making more sales directly to buyers, rather than through agents. At the same time, the CWB started to enter into long-term supply or purchase agreements. The first major deal was a 2 1/2-year long-term agreement signed with China in 1961. It called for three to five million long tons of wheat. This was followed by an even larger three-year long-term agreement with the Soviet Union in 1963.
The New CWB
The CWB was a government agency for most of its history. From 1935 until the end of 1998, the CWB was overseen and managed by three to five federally appointed full-time Commissioners who acted collectively as its chief executive officer. In addition, there was an Advisory Committee of Prairie grain farmers, which had the function of bringing Prairie grain farmers’ views to their marketing agency. The government appointed the Advisory Committee until 1975, when it became a body elected by farmers. In that year, the first farmer accountability meetings were held to provide direct communication between CWB officials and Prairie farmers.
In 1998, in response to farmer pressure for the CWB to be more accountable to farmers, one of the most significant changes in the history of the CWB occurred. On December 31, 1998, a 15-member Board of Directors assumed overall governance responsibility for the CWB and a full-time President and CEO was appointed. Ten of the members of the Board of Directors are elected by Prairie grain farmers and five of them, including the President and CEO, are appointed by the federal government. Under the new “shared governance” corporate structure the CWB is directly accountable to the farmers it serves and is much more at arms’ length from the federal government.
The CWB has entered the 21st century with an established and impressive track record of providing world-class marketing services for Prairie wheat and barley producers.
CWB’s Place in the World Market
The CWB is a marketing agency for farmers in Western Canada and is a monopoly seller of wheat, durum, and barley for export and for domestic human consumption in Canada. The CWB has gross sales revenue in the range of Cdn. $4 billion to $6 billion. It is among the top 50 companies in Canada, among the 10 largest exporting companies and one of the largest net earners of foreign exchange. The CWB is also the world’s largest wheat and barley export company.
The CWB markets most of the wheat produced in Western Canada. More than 90 percent of the wheat enters the primary elevator system; the rest is used for feed or seed on farms, or is sold locally. More than three-quarters of western Canadian barley remains outside the elevator system, either fed on farms or sold directly to feedlots. Approximately 10 to 20 percent of the barley produced is marketed by the CWB, the largest percentage of which is malting barley.
Wheat is the major commodity of the CWB, making up more than 80 percent of total CWB sales. Wheat is also the most important grain crop produced in Western Canada accounting for about half of total grain, oilseed and special crop production. However, the CWB does not market other crops grown in Western Canada, such as canola, flax, mustard, and other specialty crops. While these crops are important to a diversified agricultural economy, they are less significant than wheat.
In terms of world production, Canada produces approximately five percent of the wheat, 13 percent of the durum, and seven percent of the barley. However, Canada is a more significant player in terms of world trade in these commodities. For example, Canada has 17 to 20 per cent of the world trade in wheat, over 50 per cent of the world durum export market and 15 to 20 per cent of world trade in barley.
The CWB is only one of many players in the world grain market. In selling wheat and barley on the international and domestic markets, it must compete with large multi-national grain companies, grain traders, cooperatives and state-trading exporters and importers. It annually conducts business in more than seventy countries directly, or through companies designated as exporters for the CWB. The CWB is organized as a single-desk seller allowing western
Canadian farmers to enhance their presence in a world grain market. The CWB’s success can be measured by its ability to maintain and expand its market share for wheat, durum, and barley. Its market share has been maintained despite strong competition in the world grain trade and despite export subsidies utilized by Canada’s two main competitors: the United States and the European Union. Even with the breakup of the former Soviet Union – one of Canada’s largest export customers – the CWB was able to minimize the impact by developing markets in Asia and Latin America, both of which are forecast to account for the largest percent of Canadian wheat exports into the future.