Economic Development in Western Canada's Agriculture Sector
Presentation by Jan L. Fisher, MBA, APR, Executive
Director
Red Deer Chamber of Commerce
Presentation to Canadian Wheat Board Accountability
Meeting
Carseland & District Community Centre
330 Railway Avenue W, Carseland, AB
2:00 PM, March 2, 2004
Good Afternoon Mr. Chatney and members of our agriculture community.
I am honoured to have been asked to present the perspective that
resulted in a Canadian Chamber of Commerce policy addressing the Canadian
Wheat Board monopoly.
As Jim indicated, I am with the Red Deer Chamber of Commerce. Our
Chamber represents more than 860 businesses in the Red Deer area.
The policy position that I'm about to present was supported by the Alberta
Chambers of Commerce and Canadian Chamber of Commerce in 2003. This
means that is the message of more than 170,000 Canadian businesses.
The Chamber commends the Governments of Alberta and Canada for the
roles they have taken to promote value-added agricultural
development. We believe we must promote this opportunity even
further.
More specifically, this means addressing the barriers to value-added
economic development that are created by the Canadian Wheat Board
monopoly.
The Chamber urges changes which will:
- Provide farmers and the value-added industry the choice to deal
directly with each other and not be forced through a complex regulated
system that increases costs and reduces competitiveness;
- Remove the CWB barriers to selling, sourcing and shipping wheat and
barley and value-added products that are not experienced by eastern
Canada and other competitors in the world;
- Establish marketing equality between farmers in the Prairies and
other parts of Canada;
- Reflect Canada's free market principles; and
- Stimulate and facilitate critical economic growth.
The economic importance of agriculture in Canada is unquestionable and
that is why the Chambers of Commerce have waded in on this question.
The value of Canada's agri-food exports reached $25.9 billion in 2002,
making Canada the world's third largest agri-food exporter behind the
United States and the European Union.
In almost every region of the country, agriculture is one of the key
driving forces of the economy. For example, in Ontario, agriculture
is the second largest industry in the province.
Canada's 80,000 grain and oilseed farmers play a key part in this vital
industry. Our farmers' production is worth roughly $10 billion per
year. This is before it has been transported, processed and placed
on grocery shelves.
It is important to realize the multiplier effect that agriculture has
on the economy as a whole.
It has been estimated that every dollar earned by agriculture will
generate another six dollars in the general economy.
Clearly you, our farmers, make a significant contribution to Canada's
economy, it's trade surplus, employment and rural well being. A
strong vibrant industry will benefit all Canadians whether they live in
rural or urban settings.
One of the single biggest impediments to the development of additional
value-added processing in Western Canada is the monopoly powers of the
Canadian Wheat Board (CWB).
The differences between the level of value-added processing between CWB
commodities and those that are independently marketed in a competitive
environment is significant. The Government of Alberta has provided
these statistics as examples:
In the 2002-03 crop year:
- 2% of Canadian barley production went into food or industrial use;
- 7% of Canadian durum production went into food and industrial use;
and
- 22% of wheat production went into food and industrial use.
Clearly we have a significant way to go before we can say that we have
achieved our goals in the area of value-added agri-business development.
Compare this to the Canadian oilseed sector where, for the 2002-03 crop
year, 76% of soybean production and 53% of canola production was absorbed
by domestic food and industrial uses, with new opportunities presenting
themselves in renewable energy resources such as bio-diesel.
The Ontario Corn Producers report that Ontario processes 2.1
million tonnes of corn annually from an average crop of 5.4 million
tonnes. Ontario's industrial processing rate of 39.6% compares
favorable to 25.5% in the US.
The Ontario Wheat Producers Marketing Board indicates that
approximately 55% of Ontario's wheat production is processed
domestically. This is over twice the national average of 22%.
Why is the value-added and economic spin-off in these sectors and
jurisdictions of the Canadian grains and oilseed industry so much further
advanced than in the Western monopoly jurisdiction of the CWB?
A significant part of this answer is because of the CWB monopoly
policies that restrict a climate that would otherwise encourage local
value-added economic development.
Malt barley provides an example where free market principles would have
reduced the risk to an established value-added sector. The following
analysis was documented by the Government of Alberta.
Pool return outlooks published by the CWB near the end of 2002,
forecast malt barley prices to range from $176 to $200 per tonne at the
farm gate. Of course, farmers received only a portion of this price
when they delivered their grain and the final payment was not received
until many months later.
Because of the shortage of feed grain caused by the 2002 drought, the
CWB's price estimate was very close to the price that farmers could obtain
in the local feed grain market. This opportunity to market outside
of the CWB and get immediate payment for the barley, put the malt industry
in jeopardy.
This occurred because farmers were getting the same low price for their
grain whether they marketed it for human consumption through the CWB or
marketed it as feed grain directly to feedlots. At the same time,
the world market price for malt barley, which was in excess of $330 per
tonne, was significantly above the price administered by the CWB.
The world price si the one that Canadian malting companies were forced
to pay to acquire domestic and imported barley through the CWB.
Some of the difference between the Pool Return Outlook and the world
price can be accounted for by transportation and handling, but this still leaves
$80 to $110 per tonne premium between what the malters were paying the CWB
for domestic supplies and the CWB price signal sent to farmers.
So, as a result of the single desk system, the farmers lost, the
malting companies lost, and Western Canada's economy lost.
Foreigners won.
Farmers and the processing industry must be given the choice to deal
with each other directly in order to add value and correct these market
distortions.
Another example of how the CWB deters our economic development has to
do with Farmer Owned Value-Added Processing.
The development of new generation cooperatives has become an exciting
way for farmers to develop their businesses. Under the new
generation cooperative model, farmers come together to invest, market and
process their own crops. In this way, producers directly benefit
from the increased value-added processing.
In the US, new generation cooperatives have become some of the leading
processors, offering farmers a valuable outlet for their commodities and
providing badly needed jobs in rural areas.
The Dakota Growers Pasta Company is one striking example of this
trend. Founded in 1991, the Company began processing pasta in
1993. In the last 10 years they have developed into the third
largest pasta producer in North American and the largest supplier of dry
pasta to the retail market.
It should be noted that the Dakota Growers could not process this
current volume of durum without acce3ssing Canadian production. Once
again we find ourselves in a situation where raw Canadian exports are
supporting jobs and development in another country.
Can the Dakota Growers success be repeated in Canada?
It has been attempted, but the efforts have not met with the same
success. The Prairie Pasta Producers have been organized for a
number of years with the intent of building a processing plant in Western
Canada. They have been blocked by the ability to source durum
directly from their potential owners.
If they established the plant, the farmers would have to buy back their
own grain at a rate higher than it cost to grow it. This then would
increase their input cost and reduce their profit margins. It also
makes the product less price competitive when compared to similar products
produced outside the CWB zone.
As a result, the Government of Alberta says there are no new generation
cooperative processing plants for wheat and barley anywhere in Western
Canada. This is despite the fact that this form of business
structure exists for other commodities like pulse processing.
This signals that CWB monopoly legislation stands in the way of this
timely and extremely important issue for Western Canadian economic
development.
The Chambers of Commerce across Canada solidly believe that our
economic future lays in value-adding our own raw materials instead of
sending them out of country. In some cases, we even purchase the
finished goods back at many times the price we received for the raw input.
We cannot afford to solely be hewers of wood, drawers of water and
providers of grain.
AGRIWEEK said that in 2001 Canada processed only 11.9% of its wheat and
barley and that we exported almost five times as much as we
processed. The US on the other hand, processed over 60% of its
domestic production.
These statistics clearly indicate that we are sending our value-added
processing opportunities, and those jobs and prosperity, to other
countries.
We have seen that value-added processing in eastern Canada and for
crops outside the CWB's mandate, exceed the level of processing for
western Canadian wheat and barley, and offer exciting opportunities for
our local communities.
Increases in value-added processing, particularly farmer owned
value-added processing, benefits farmers while adding jobs and much needed
encouragement for our young people in rural communities, who have been
leaving an increasingly challenging, competitive and uncertain
agricultural economy.
The value-added products produced in turn, will create a multiplier
effect of six times -- significant enough to generate invaluable economic prosperity
for our entire country.
This is why Red Deer and Regina Chambers of Commerce took a lead role
in making marketing choice an economic issue that can drive prosperity for
the Prairies.
The Canadian Chamber position does not call for an end to the
CWB. We want to see an end to the CWB marketing monopoly and its
restriction of western Canada's economic potential.
We recognize that there may be roles for the CWB, and like any
business, if it is competitive and offers services that are needed and
wanted in the market place, then it will continue to exist.
The Chamber's position was endorsed across the country because the
current situation does not reflect Canada's free market principles or the
right to freedom of choice. It also dates back to a time when our
economies were largely driven by agriculture. They are not now, and
we need to take a broader look at the exciting opportunities that could be
available for eastern prosperity.
Support, particularly from eastern Canadian Chambers, was provided
because those business people acknowledged that if they didn't support
marketing choice for western farmers, then they were essentially saying
that they wanted their farmers and their economies to be as restricted as
ours have been by single desk marketing in the west.
These are business people just like you. They want to make sure
that we stay a prosperous nation by looking at opportunity and not fearing
change.
As I close, I'll leave you with a little story.
Joan Smith started the day early, having set her alarm clock (MADE IN
JAPAN) for 6 am. While her coffee pot (MADE IN CHINA) was perking,
she blow-dried her hair with a drier (MADE IN HONG KONG).
She put on a blouse (MADE IN SRI LANKA), designer skirt (MADE IN
SINGAPORE) and pumps (MADE IN ITALY).
After cooking her breakfast in her new electric skillet (MADE IN INDIA)
she sat down with her calculator (MADE IN MEXICO) to see how much she
could spend today. After setting her watch (MADE IN TAIWAN) to the
radio (MADE IN INDIA) she got in her car (MADE IN GERMANY) and continued
her search for a good paying CANADIAN job.
At the end of yet another discouraging and fruitless day, Jane decided
to relax for a while. She put on her sandals (MADE IN BRAZIL),
poured herself a glass of wine (MADE IN CHILE), and turned on her TV (MADE
IN INDONESIA), and then wondered why she couldn't fine a good paying
job.... in CANADA.
Value-added processing.
That's where the money is for Canada, for business, for farmers and
farmer-driven agri-business.
It creates jobs in our rural communities with salaries that are well
above the minimum wage. Those dollars get spent in our rural
communities, and that increases the prosperity for all. |
