A modest proposal on grain and rail

(February 24, 2014)  The three Prairie Agriculture Ministers and Federal Agriculture Minister Ritz are meeting today in Winnipeg to wring their hands over the catastrophe they created in western Canada’s grain exports.  No doubt there will be much finger pointing and probably some not-so-subtle bullying of the lone NDP Ag Minister to shut up about the Wheat Board and orderly marketing.

Conservative Ag Ministers consulting with Manitoba counterpart (center)
– May not be exactly as illustrated –

Ritz and his cohorts will be hoping to distract farmers and the Canadian public from their responsibility for a catastrophe which strikes at one of the fundamentals of the Canadian economy:  grain exports.  No doubt they will appoint some favorite cheerleaders to Minister Ritz’s recently announced transportation study where they will spend the three million or so dollars of taxpayer and farmers’ check off money blowing smoke for the next five years.

Since I love new words and phrases and having been involved organizing the defence of farmers in too many regulatory and court processes over the years, I have a legal concept the Ministers might like to refresh themselves on:  “proximate cause.”

This handy little concept means “the source from which all your misery flows.”  Certainly there will be a lot of misery in Canada over the coming years due to the collapse of grain exports, but the proximate cause, as the lawyers would say, is the killing of the Canadian Wheat Board’s single-desk responsibilities by Ottawa.  Killing the Wheat Board killed our niche in the international grain market.

This organization and this blog have pointed out that without the CWB the private trade has no incentive to cooperate or try to eliminate shipping delays because they can simply download extra costs to their new captives: prairies farmers.  The railways have an interest in getting rid of the Grain Revenue Cap and have played the politicians and farm groups like a fiddle using their favorite AstroTurf groups.

In fact this situation is exactly what the private trade wants:  a large captive supply of grain sitting on the Canadian prairies hanging over the world market.  Their mantra seems to be “work less, make more.”  And now they can because western farmers have no power to take anybody to court for hurting them, unlike when their farmer-controlled CWB could and did defend them in both regulatory processes and the courts.

Saskatchewan Economy Minister Bill Boyd noted that elevator companies do not want to take on the railways by launching level of service complaints.  This is hardly breaking news.  The elevator companies will not do it because they don’t get hurt.  They profit off the spread between world prices and what they can get away with paying increasingly desperate prairie farmers.  Besides, with their Canadian facilities captive to one or the other of the railways, why offend them with costly complaints or legal actions when they can source grain from their US facilities? 

The railways, as usual, are playing a long game to make sure that in the end they get to raise freight rates on grain, perhaps by as much as 40% just as Pershing Square Capital Management likely hoped when they bought an interest in CP Rail in late 2011 as the end of the farmer-controlled CWB was in sight.    For this windfall we can be confident a few darts sent in their direction by Conservative politicians and groups like the Grain Growers of Canada are of no great concern.

Federal and Provincial governments are besotted with market ideology and are thrashing around trying to find a market solution to a defective market place that does not involve the one obvious solution which worked extremely effectively for over 80 years in western Canada – a single-desk seller for wheat and barley with the clout to balance the power of the two railways and the elevator companies.  The single-desk was a market-based solution that worked.

There are other solutions that would work, although perhaps not quite as well, without creating a new Wheat Board.  Having gone most of the way back to 1900 in grain marketing, Canada could go all the way and nationalize the port terminals and run them as public utilities.  After all most of those structures were either built by the Federal Government in the first place or built by farmers.  A few years after the turn of the last century the Federal Government also nationalized all the railways not owned by CPR to create the Canadian National Railway.

Using the legal precedent so far established by the killing of the Wheat Board, this time the Government of Canada can simply seize the assets of the two railways and all the port terminals without any compensation to their owners.  This is a modest proposal that many farmers would agree with, especially if their first choice – their single-desk Wheat Board – isn’t returned.