Home

E-Mail

Back

Prairie Grains is the official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain Growers Association,
South Dakota Wheat, Inc., and the Minnesota Barley Growers Association.

What’s at the heart of the U.S.-Canadian grain trade debate, that has been a source of contention between the two countries over the past dozen years? Quite simply, information disclosure, or the lack thereof.

Indeed, current and previous trade negotiations have been like a football game, where the Canadians maintain the secrecy of their playbook, and at the same time have full access to that of the U.S.

This point is supported by a report released last fall by the U.S. General Accounting Office, "U.S. Agricultural Trade: Canadian Wheat Issues" (GAO report NSIAD-99-21, October, 1998, the full text of which may be found on the internet: http://www.gao.gov/new.items/newtitle.htm).

The Canadian Wheat Board, established in 1935 to regulate Canada’s grain trade, is currently the largest grain marketing board in the world. The CWB handles about 20% of the world wheat and barley trade, according to the GAO report. The CWB has a monopoly on certain Canadian grain sales. It has statutory authority to acquire all western Canadian wheat and barley sold for domestic human consumption or export. Western Canadian farmers are required to sell their wheat and barley for domestic human consumption or export to the CWB, which then markets the commodity in domestic and foreign markets, including the U.S.

The Canadian government backs the CWB operations through the CWB’s status as a crown corporation. The CWB is a state trading enterprise (STE) with a monopoly on certain Canadian grain sales and receives Canadian government subsidies in a number of direct and indirect ways. The CWB can manipulate grain markets through the use of non-disclosed sales and pricing strategies, and discriminate prices in certain markets.

Through its status as an STE, the CWB has a system of reimbursing farmers in multiple payments, rather than in a lump sum at the time of delivery. According to the government of Canada, the CWB pays farmers an initial payment of 70-75% of the expected final return for their grain. The payment system gives the CWB flexibility in setting its export prices and protects it from operating losses due to decreases in market prices, according to the GAO report.

These methods of pricing and marketing not only affect cross-border trade, but also the ability of the U.S. and other countries to fairly compete in foreign markets.

As a result of talks following protests in several Northern Plains states last summer, the U.S. and Canadian governments on Dec. 4, 1998, announced a plan to reduce tensions caused by the ongoing bilateral wheat trade border dispute. The plan includes:

1) Canada will provide the U.S. with wheat export sales forecasts and participate in quarterly consultations on its export levels to the U.S.

2) Unilaterally, the U.S. will utilize the resources of U.S. Customs and USDA to track grain imports from Canada. This new approach to current end-use certificate requirements will allow the U.S. to obtain information regarding Canadian pricing practices into the U.S. market by wheat class and quality characteristics.

3) Canada will immediately accept rail shipments of wheat, barley, oats and rye from Minnesota, Montana and North Dakota for transshipment across Canada to the West Coast. After six months, Canada will agree to accept rail shipments of grain from other states.

4) Canada will allow grain shipments from Montana and North Dakota to be delivered to Canadian elevators under a simplified regulatory framework. Over the next six months, the U.S. and Canada will work to extend this capability to other U.S. producers.

5) Canada will eliminate its requirement for Karnal bunt testing on grain originating from 14 to 16 states. Canada also will eliminate Karnal bunt testing for other states within one year provided APHIS demonstrates the absence of Karnal bunt in those states.

These measures may be compared with over-the-counter head cold remedies, however, treating the symptoms, without curing the cold. The outlook in 1999 for a soft global grain export picture, combined with a continued strong U.S. market, will likely compound already gaudy import figures: Between 1990 and 1997, U.S. imports of Canadian red spring wheat increased by more than 2,000% to 1,449,600 tons, and imports of Canadian durum wheat increased by 57% to 427,600 tons.

Bottom line: the CWB remains a viable STE that plays by different trading rules than the U.S. Trouble is, CWB pricing schemes are difficult to substantiate.

Little information is available on CWB sales transactions, says the GAO. The CWB discloses limited details about its prices for the wheat and barley that it sells to its trading partners. Many in the U.S. believe that the lack of transparency (openness) in the CWB’s pricing methods provides the CWB with a greater ability to distort trade than is found among private grain traders. Further, that nontransparent CWB prices make it difficult to assess whether the CWB’s practices are consistent with its international obligations under trade agreements.

Data collected by U.S. Customs and USDA, which include origin, volume, and value of the grain, cannot be used as part of such an assessment. This is because the data lack certain details on the grading (Canada has a discretionary grading and variety approval system) and quality of the grain (such as protein) and other specifics of the transaction, according to the GAO. Thus, it’s going to be difficult for Customs to collect at the border the detailed information needed to determine whether the CWB is engaging in improper pricing.

The U.S. is working through the World Trade Organization to increase the amount of information STEs, such as the CWB, must report on pricing and other activities. Thus far, the U.S. and other countries’ efforts to expand STE reporting requirements on pricing have had limited success. The WTO has recently updated its format for STE reporting to require more information on STE pricing practices. However, U.S. officials believe that the newer format does not require the level of detail necessary to determine if the CWB and other STEs are engaging in improper pricing.

We cannot effectively negotiate or resolve our cross-border trade dispute with Canada, or effectively prove or disprove that the CWB is a disruption to U.S. grain trade, until there is full disclosure from the CWB of its acquisition costs, including STE administration costs, transportation costs, payment structure to producers and for customers (including lack of quality payments), and subsidized cleaning, handling, and storage costs.

Until the Canadian government gives full disclosure and access of information requested to conduct meaningful trade negotiations, the U.S. must consider stronger measures, including an import quota, or discontinuation of trade in bulk wheat, barley and durum between the two countries. It would be unfortunate to come to such extremes. But it’s also unfortunate that this long-standing dispute in place since the 1980s has not yet been resolved.

Mark Gage, President
ND Grain Growers Assn.

Pete Kappes, President
MN Wheat Growers Assn.

Chet Edinger, President
SD Wheat, Inc.

Rob Rynning, President
MN Barley Growers Assn.

Bill Goertz, President
MT Grain Growers Assn.

The more things change, the more they
remain the same?

The need for reform in the way the federal government provides risk management assistance to our nation’s farmers has never been greater. The current system is simply not working as desired.

Low farmer participation and the poor financial performance of the program have been attributed to several factors. There are farmers who say the premiums charged are too high relative to the indemnities that would be paid out in a claim. Others say the yield coverage is too low. Some farmers have found the paperwork burden and foul-ups not worth the bother. There also seems to be a willingness of some producers to just take a gamble on the weather.

It is obvious that crop insurance and ad hoc disaster assistance work at cross purposes. It should also be obvious that adequately funding two separate risk management programs will become more and more politically difficult given the budget pressures facing Congress.

Mr. Speaker, the U.S. Department of Agriculture recognizes the seriousness of these problems. They understand that our nation’s farmers need a workable and affordable risk management program that helps protect them from production losses associated with the vagaries of nature. The Department’s proposal embodied in the legislation I am introducing is a comprehensive reform package designed to make crop insurance the primary risk management tool for farmers. This is a proposal which will rechannel federal farm disaster relief spending into a single, more disciplined, on-budget insurance program.

For this kind of bold and comprehensive insurance program to work, Congress will have to agree to provide adequate funding for the new insurance program. This bill also asks Congress to agree to parliamentary and budget changes that are designed to discourage future ad hoc disaster bills. While I have concerns about certain aspects of the administration’s plan and whether the congressional budget resolution will allow for adequate funding, I believe the administration proposal merits our consideration in the event these issues can be addressed.

Remarks by Rep. E (Kika) De
La Garza, on April 14,
1994, during the introduction
of the Federal Crop
Insurance Reform Act of 1994

Rural solution to an urban problem

If the only viable lifestyle available to 21st century Minnesotans is the metro area, congestion and sprawl will continue to get worse. The goal of our capital investment policy should not be to perpetuate donut-shaped statewide development, with a vacuous urban core, strong suburban ring and virtual vacancy around the ring. Rather, we must target our capital investments to have development that is more like a pepperoni pizza, with a vital metropolitan area supported by a series of regional centers throughout greater Minnesota.

It is important for public and private investors to understand Garrison Keillor is only telling part of the story about rural Minnesota. For too many years, virtually the only thing private and public investors have heard about the hundreds of Lake Woebegones scattered throughout rural Minnesota is we offer "strong women, good-looking men and above-average children." It’s time these investors learn we also offer an alluring quality of life, a motivated workforce, a growing economy and a highly productive place to invest.

Excerpt from a column written by Paul Olson, president of the Blan-din Foundation, a Grand Rapids, MN-based foundation dedicated to improving life in communities throughout Minnesota.