Issue 27
March 2000

WHEAT WORLD

Activities Funded in Part by the Minnesota Wheat Checkoff

USW, CWB trade barbs over wheat board trade practices

U.S. wheat leaders were invited by the Canadian Wheat Board earlier this year to attend a CWB meeting in Winnipeg.  In an address to the group there, U.S. Wheat Associates president Alan Tracy didn't mince words: He charged the CWB with undercutting prices and distorting markets, and pointed out that those practices are hurting Canadian wheat producers as much as they harm international wheat trade.

"We in the U.S. wheat market have a serious problem with your monopoly status and the way it is used to compete," Tracy said. He cited numerous examples of price undercutting by CWB sales people, citing specifics in the United Arab Emirates, Sri Lanka, Guatemala, and the Philippines.

"Offering spring wheat priced with our lower protein winter wheat is a common practice," said Tracy.  "Last year in the Philippines, a largely U.S. market we have built and cultivated through long years of work, millers informed us of a standing offer from the CWB to match any U.S. offer with the same spec wheat at $7 per ton under the U.S. price. In a business where ten cents a ton can decide a sale, these 5 to 7 dollar differentials cannot be explained except as buying the business by giving away some Canadian producers' wheat."

The Canadian monopoly, he pointed out, "is trade distorting, unfair to your competitors, unfair to your producers, and out of step with the modern, market oriented world."  Tracy challenged CWB officials to give Canadian wheat producers a choice. "It's time for another referendum vote – with a clear and explicit choice. Freedom to market or the status quo?" Tracy said.

Not all the discussion was about the CWB monopoly: there was also discussion on how European Union export subsidies are hurting all North American wheat producers. "The U.S. and Canada face many challenges in common," said Chris Shaffer, USW chairman. The clear message to the Board, however, was that the U.S. wheat industry expects Canada to end its monopoly. "We face many of the same issues in the WTO," Shaffer said, "but the monopoly status of the CWB drives us apart."

"You can fix this problem so that we can finally work together on issues for all North American producers," Tracy said, later acknowledging that it "may (have been) presumptuous to accept the invitation and then criticize the way the CWB does business" but that he wanted to "make the most of this welcome opportunity."

CWB: "we don't undercut prices"

The CWB issued a public response after the address, rejecting accusations from USW that it wins markets by undercutting prices.  "We win our customers by offering quality products and good service. We don't undercut prices," said CWB Chair Ken Ritter. CWB CEO Greg Arason said that the CWB pricing practices cited by Tracy contained several errors, and expressed frustration in USW's "persistence in spreading inaccurate information despite repeated clarifications by the CWB and despite no less then seven unsuccessful U.S. investigations into CWB pricing practices designed to find evidence of unfair trading."

USW responded with its own reply to CWB claims of innocence: Prove it.
"Their response simply illuminates the reasons for the U.S. calls for transparency. For years they have denied charges, even when presented with bills of lading and contracts, but they still won't open their books to the light of day to prove their case," Tracy said. "Frankly, their claims
of cherubic innocence are getting quite old and decrepit. If the CWB was transparent, everyone, even their own producers, would have all the proof they need that the U.S. is telling the truth." Tracy also stepped up his criticism of the CWB's failure to respond to the needs of the Canadian wheat growers who want a choice in how they market their wheat, pointing to a news release from the Western Canadian Wheat Growers Association (WCWGA).

In the release, the WCWGA said that, "the wheat board operates at a level of secrecy that fuels cynicism among farmers and may be one of the reasons for its plummeting support." The WCWGA reported that a 1998 poll, conducted by the CWB but never formally released, showed that two-thirds of Canadian farmers wanted either a dual marketing system or an open market.  "Again, I challenge the CWB to hold a referendum on their monopoly," Tracy said. "If they are doing such a great job, open their books, prove it to their growers and the international community, and begin the 21st Century with a clear commitment to offer choice to the growers of Canada."

United wheat voice urges for Chinese trade

The National Association of Wheat Growers, WETEC, and USW recently sent a letter to each member of Congress urging support of permanent normal trade relations (PNTR) for China. The letter cited tariff reductions, increases in the tariff rate quotas for wheat, reforms of state purchasing agencies and the elimination of export subsidies as important advantages for U.S. agriculture.

The letter pointed to China as the most important potential growth market for U.S. wheat exports and may be the key to rejuvenating trade in Asia since that regions economic crisis. The wheat industry has identified granting China PNTR as a priority during this session of Congress.

NAWG leaders address Canadian growers

NAWG President Jim Stonebrink and Duane Grant, a NAWG board director from Idaho, recently attended the convention of the Western Canadian Wheat Growers Association to represent the views of U.S. wheat producers.

Grant said that the North American Free Trade Agreement opened U.S. markets, but that the U.S. has been slow to respond to unfair trade, such as predatory pricing by the Canadian Wheat Board. Grant said U.S. farm groups are united on eliminating export subsidies and trade-distorting domestic supports, disciplines on state trading enterprises (CWB), adopting new technologies based on sound science, and an adequate safety net until trade is fair.

He also said that U.S. producers are responding to farm market changes with lower costs of production (through consolidation, adopting new technologies, and devaluation of fixed assets) as well as market differentiation (new-generation co-ops and strategic alliances).

Continued food aid urged to spur wheat use

Wheat has always played a key role in food aid, and U.S. wheat leaders have been encouraging last year's largest purchaser of U.S. wheat—the federal government—to maintain its budget for food aid.  Of 8.1 million metric tons of U.S. food aid donations in fiscal year 1999, wheat and wheat flour comprised about 6 MMT. "In another year of low prices and high wheat stocks, continued aid would be a tremendous help to U.S. farmers, as well as hungry people around the world," says Lynn Blair, chairman of the Washington Wheat Commission.

U.S. wheat leaders point to a USDA Economic Research Service Food Security Assessment report which may be found online at (usda.mannlib.cornell.edu/reports/erssor/international/gfa) that cites 67 food aid dependent countries and the need for continued food add to help Third World countries meet their nutritional needs.

Did You Know?

•  U.S. Wheat Associates does behind-the-scenes work in 130 countries to boost the overseas consumption and encourage the sale of American wheat.  USW activities meet the needs of several aspects of market development, including trade servicing and technical assistance, market analysis, and consumer promotion.

•  USW operates on both a regional and country basis, depending upon the needs and opportunities of the area. Each USW overseas office is staffed with highly qualified U.S. and local employees who are fluent in the languages of the area and experienced in the field of international grain marketing.

•  For more information on USW, see its website: www.uswheat.org.   There, you'll find U.S. Wheat Export News, USW newsletters, USW's annual crop quality report and other U.S. wheat export information.

Wheat leaders talk trade with media

From left to right: Barbara Spangler, director of the Washington, D.C.-based Wheat Export Trade Education Committee; Bruce Hamnes, a Stephen, MN producer, chairman of the Minnesota Wheat Council and vice chair of U.S. Wheat Associates; and Alan Lee, Berthold, ND producer and chairman of the North Dakota Wheat Commission, met with members of the Grand Forks, ND media to discuss wheat trade issues before traveling to Winnipeg to meet with representatives of the Canadian Wheat Board.