UPDATE 3-Canada aims to end Wheat Board monopoly in 2012

Thu May 19, 2011 1:53am IST

Related Topics

* Ag minister says industry supports 2012 date for change

* Ritz says CWB still has a role to play

* CWB monopoly on western grain in place since World War 2

* Shares of grain handler Viterra surge (Adds Wheat Board comment and Viterra share move)

By Randall Palmer and Rod Nickel

OTTAWA/WINNIPEG, May 18 (Reuters) - Canada's Conservative government will likely introduce legislation this autumn that will end the Canadian Wheat Board's marketing monopoly on wheat and barley in 2012, the agriculture minister said on Wednesday.

Western Canada's grain industry has operated since World War 2 under a monopoly that forces farmers to sell wheat and barley to the board, unlike other crops such as canola.

Farmers who oppose the Wheat Board have long urged the government to end the world's last major agricultural monopoly, saying they want the freedom to find the best possible prices. Other farmers who support the CWB say the clout of the its single marketing desk brings them the best, most reliable returns.

The legislation would take effect in August 2012, the beginning of the 2012-13 crop marketing year, said Agriculture Minister Gerry Ritz, shortly after Prime Minister Stephen Harper reappointed him to the post in the new cabinet.

"Everyone recognized the complexity of this," Ritz told reporters. "It is going to take a certain amount of work with (industry groups and farmers). All has to dovetail in to make the farm gate stronger."

Shares of Canada's top grain handler, Viterra VT.TO, rose in Toronto after Ritz's comments, ending up more than 2 percent.

Earlier in the day, Viterra Chief Executive Mayo Schmidt said ending the monopoly would speed improvements to Canada's grain-handling system. [ID:nN18254863]

After the Conservatives won a parliamentary majority in the May 2 election, giving them the power to end the monopoly without help of other parties, the Wheat Board has dusted off old contingency plans, said its elected chairman, Allen Oberg, who farms in Alberta.

Those scenarios include becoming a voluntary grain pool; operating in an open market for barley and a single desk for wheat if the government stages the monopoly's breakup; and a structure in which farmers are shareholders, Oberg said.

Without grain elevators and port terminals, however, Oberg said the Wheat Board would be hard-pressed to compete with handlers such as Cargill, Viterra and Richardson International.

"It's hard to say what a new structure might look at," Oberg said. "It could survive, I suppose, but it would be a much smaller organization."

Ritz said the government would look at all of the CWB's roles in considering its future.

"But at the end of the day, certainly there is a role for the Wheat Board to play," Ritz said. "We'll have to work out just exactly what that is."

He said the planned timing of the change has the support of industry groups.

The chief executive of Cargill's Canadian subsidiary told Reuters last week that the grain industry should have at least six months' notice of a change, which he said would logically take effect in August 2012. [ID:nN11266863]

FARMERS ON BOTH SIDES

Farmers who support the board are angry that the government plans to end the monopoly through legislation, rather than allowing the farmer-elected board of the CWB to decide its direction, said Kevin Wipf, executive director of the Canadian office of National Farmers Union.

"It's going to mean the loss of significant marketing power," he said. "One thing farmers agree on is this is an issue to be decided by farmers. (Government) better be prepared to face the discontent they'll see in the countryside."

The legislation would likely amend the Wheat Board Act, a federal law that governs how the CWB operates.

Stephen Vandervalk, president of the Grain Growers of Canada, said his group supports the government's approach to ending the monopoly.

"It's going to mean a lot better cash flow, it's going to mean a lot more certainty as far as contracting and deliveries," said Vandervalk as he seeded his farm near Lethbridge, Alberta.

One of the chief criticisms of the monopoly system is that farmers get an initial payment from the CWB but must wait for full payment from the pool seller.

Vandervalk said an open-market system may also spur construction of more processors in Western Canada to turn barley into malt and to mill wheat.

While promising to end the CWB's monopoly on Western Canadian grain sales, Ritz reiterated on Wednesday the government's support for supply management of other Canadian farm industries such as dairy. (Reporting by Randall Palmer and David Ljunggren in Ottawa and Rod Nickel in Winnipeg. Writing by Rod Nickel; editing by Peter Galloway and Rob Wilson)

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