Private_SNAFU(July 29/15) The Agricultural Producers Association of Saskatchewan (APAS) along with Saskatchewan Wheat Development Commission and Saskatchewan Barley Development Commission hosted the “Farmers Forum on Grain Transportation, Getting on Track: Solutions for the future” in Regina on July 20, 2015.  From the perspective of grain farmers, the results could be characterized with the old military term SNAFU (Situation Normal, All Fouled Up).  For the grain companies it is more like:  “Situation Nice, All Finances Up.”

From the academic and impartial presenters at the APAS conference, the message was essentially the same: “more grain than ever is moving to port but farmers are not seeing either higher prices or fair delivery opportunities” and “farmers have no market power and are getting fleeced by the private trade.”  No surprises there.  The numbers have changed but not the structure.

What has changed is the spin put on this.  Now instead of farmers having no market power, they are characterized using the softer and more traditional “price takers.”  And the grain companies, instead of taking “excess profits” are now characterized as “rationing access to the system” by increasing the basis levels they charge farmers to get their grain into the system.  In other words, how desperate the farmer is to sell determines how badly he is fleeced by the grain companies.

But hey, it is not really the devil making the grain companies do this.  The grain company apologists say it is the railways!  And the grain companies complain the railways sometimes don’t deliver a handful of cars on time.  Never mind that the numbers show the railways are delivering more grain than ever to port.

Faced with this fact the argument then shifts to claiming that is not really the railways’ fault either because our system does not have enough capacity now.  How do we know this? The market, it is claimed, is telling us.  This fairy story goes that the grain companies are being forced by the invisible hand of the market to charge farmers excessive basis, aka “profits,”  to get them to stop calling the elevators wanting to deliver grain for sale so the elevator companies can re-sell it and make excess profits.  The logic here seems to be that if we take the telephone away from farmers, then they will not hassle the elevator companies and force them to charge farmers excess basis.

If that strikes you as a bit of self-serving circular logic, it is and don’t blame me, I’m just the reporter.  You can read the original documents here.

Private trade apologists look for solutions

Private trade apologists look for solutions

The Frontier Center for Public Policy predictably blamed government regulations.  Their revelation appears to be that the grain companies are charging excess basis because the railways are over-regulated.  Presumably if the railways could take their share of excess profits from those price-taking farmers all would be well.

Farmers who are captive to both the railways and grain companies might not be happy, but two out of three components in the grain system certainly would be.  More pathetic by far was the grasping for “market solutions” to this mess that did not involve anything that would actually regulate how the players in the grain market behave.

How that market actually behaves was very well explained by the eminently clear spoken Montana-based consultant Terry Whiteside.  He explained that when the US deregulated its railways in the 1980s there were 40 major railways.  Now there are a mere 4 left and they have divided up the country “into their own regional monopolies.”  So he essentially said their US Surface Transportation Board would have to impose more regulation to make their system work so it did not suck the life out of their agricultural producers – producers who still enjoy generous US government production subsidies by the way.

Given the US experience, not to mention the mess western Canadian farmers are now facing, it makes all the so-called market solutions in transportation seem less than timely or useful.

Of course nobody at the conference even alluded to the one market solution that actually made our transportation and handling system work efficiently and fairly for everyone including farmers and small processors:  the recently deceased single-desk Canadian Wheat Board.  Instead the grain companies are calling on the railways to buy more locomotives and grain cars, the railways are calling on the grain companies to get their act together and build more capacity, and both of them seem to expect farmers to pay for it all.

Perhaps Grain Summit 2016 or whatever it is called will finally come to the conclusion there are in fact zero market solutions to western Canada’s landlocked status that do not involve either draconian government regulation or a single-desk Canadian Wheat Board.

Perhaps Ottawa may even come to acknowledge that the single-desk Wheat Board which evolved after much trial, error, and misery on the prairies was in fact the only viable market-based solution available.  But as many of us know, evolution can really be offensive to those who still believe in “invisible hands moving in mysterious ways.”

Since farmers are the ones who pay for all this nonsense, perhaps it is also time for gatherings like these to focus on restoring the institutions which actually worked that Ottawa has so recently destroyed rather than outlining the SNAFU we all are now living with.  Then we would truly be getting “on track.”

Comments are closed.