Tuesday, September 13, 2011

Forced Membership In The Canadian Wheat Board

Today's poll question; should farmers be forced to join the Canadian Wheat Board? Canadian wheat farmers recently voted 60% in favour of keeping the institution, which forces the other 40% to join the monopoly. Personally I don't think they need to scrap the CWB. If 60% of farmers want to only sell their wheat to the CWB, they should be allowed to do so. The problem is with forced participation in the monopoly, and that should be broken. According to an economic impact analysis on their own website: The Canadian Wheat Board "exists to serve the needs of approximately 85,000 western Canadian farmers, with a sole mission to maximize their returns from the sale of their grain".

How do monopolies get the best price for their product? They restrict supply, driving up the price. That's worse for consumers than it is for the majority of farmers. Less wheat makes it to market, making it more expensive. The means by which supply is restricted will benefit some farmers while hurting others; but the only group guaranteed to pay a price is consumers. Should millions of Canadians have to pay a higher price at the grocery stores so that 60% of farmers can maximize their profit margin? You would think that the NDP would want to bust up the monopoly, but evidently they are taking the side of the price fixing cartel. That's not what I would call "populist".

Monopolies are economically inefficient and hinder market growth. Perhaps somebody should ask Pat Martin if he supports all monopolies, or just this one particular monopoly.


  1. If union members had to follow the same procedures to work and get paid, like grain growers do, there would be absolute panic and lots of strikes.
    How many would like to tell their boss, in March or April how many hours they would work in the work year, then hope they could put in that many hours. Then wait till the fall to be told how many of those hours they would be paid for, (after all costs of those working hours are deducted) and then get paid an initial price for said work. The rest of the pay would come months later with a final payment for those hours coming in about 2 yrs.
    When a farmer gets his cheque from the elevator they sell to, freight, cleaning, elevation, and other costs are deducted. These costs average about 30% or more. When you buy something, the cost of the freight to get it to you is added in. Farmers pay the cost of freight to the buyer.
    One reason farmers support the cwb is they don't have the time to sit at a computer all day to see who is paying what for grain. However, many changes must be made to the way you are forced to decide in the spring how many acres of each crop you will seed, and hope you can harvest, then hope the cwb can sell it.
    Put it this way, as a blogger you must tell us in March how many blogs you will do for the year, and what topics you will cover. Then your year starts Aug 1st-July 31. But you work from April (seeding) to fall, harvest writing said blogs on said topics and from Aug-July, someone tells you how many you can publish on what topics.

  2. Yes MaryT, all the more reason that membership should be optional. But isn't forcing it to be scrapped as unconstitutional as forcing farmers to join? If that's how 50%-60% of wheat producers want to sell their product, then let them. If this is about freedom of choice, then let the participants decide.

  3. First of all, only western canadian farmers are forced to sell their wheat and malt barley through the cwb.

    Secondly, nobody is "scrapping" the cwb. The government is going to make doing business with them OPTIONAL, not mandatory.

    Thirdly, they are not a monopoly at all, they are a monopsony, which means they are the only buyer and set the price to the people forced to deal with them. Supply management restricts supply of production in milk, eggs, poultry. There is no such restriction on the production of wheat or malt barley.

    The cwb can sell a western canadian farmers grain for whatever price they want, but they have no power in the world to restrict supply to drive prices higher. Canada is not a major grain supplier anymore and has no ability to set prices around the world

  4. Thank you for the information.

    Yes, it is only Western farmers, and Western farmers only account for what, 95% of Canadian wheat production?

    Secondly, Pat Martin sure seemed to suggest today that the CWB was going to be scrapped. Many people do want it to be scrapped altogether and that option has been widely discussed throughout this debate.

    Thirdly, you say monopsony, I say monopoly. Regardless of your prefered definition, it doesn't matter because the effects are the same. They both create imperfect competition leading to a deadweight loss "the loss of mutually beneficial transactions that are not transfered to another agent".

    Fourthly, supply restrictions in Canada may not have a significant effect on world prices, but they sure do affect domestic markets.

  5. Can you even call it a pure monopsony when the single buyer is elected by and working on behalf of the sellers? At what point does it just become a cartel?

  6. There is only one issue that is worth discussing in this whole charade.

    Do I , as a Canadian, have the right to do with my property as I wish? Yes or No?

    (I guess a follow up would be: Do farmers of one belief have the right to force other farmers to pool their products together against their will?) Yes or No? Why?

  7. I almost voted yes, for no other reason than if Western Farmers have to work under the CWB, then all farmers should.

    Having said that, it would have been the fastest way to get it abolished altogether. It's as simple as that. Dad was a hard core proponent of the Board until they didn't call his wheat at all for a crop year. Eighteen months he had to sit on his grain while his savings were being depleted, waiting for the Board to allow him to sell his grain. When he finally could sell his grain, it was to the ethanol plant 15 miles away who paid him more than the PRO for the crop year for the grain.

  8. If you are listening to Pat Martin you have bigger things to worry about than the wheat board.
    He seems to think that Harper is an evil Stalinist dictator for giving farmers more control of their lives....
    How is removing more government control Stalinist?
    It's absurd.


  9. Had a talk with a neighbor yesterday who like the cwb, but also have contracts for other crops not controlled by the cwb. Seems those contracts for lentils etc are not so great. If you sign up to deliver/sell x number of bushels, and don't produce that much, you better be going to your neighbors for the rest, as you are penalized for non delivery.
    Also, same for some wheat contracts now, you must deliver it all to the cwb by crop year end, or you are penalized about 5.00/bushel. Or maybe it is kilogram. How can one predict the weather in March/April for what will be harvested in Sept/Oct. Changes must be made, and my suggetion to the cwb (made several times) is those who work for the cwb have their salaries go up and down with prices for grain, costs of strikes and other things. They disagree, want their cheque, regardless. Who would have guessed. Did you know that farmers pay all demurrage charges for ships waiting to be loaded, during a strike by longshoremen or other port workers or in case, office workers.

  10. "Should farmers be forced to join the Canadian Wheat Board?"

    Wrong question. It should be: "Should ALL farmers IN CANADA be forced to join the Canadian Wheat Board?"

    I think the Con's should force ALL grain farmers in Canada to be part of the CWB. If this were the case, then the CWB would NOT exist and be dismantled within a week OR the farmer would have a choice to be a member or not. There is no way that the rest of Canadian farmers would put up with their rules. Ontario and Quebec would never live under the rules.

    Clown Party