Canada has lost credibility and grain customer trust thanks to deregulation

Prairie farmers have seldom faced such a barrage of bad news. The three giant agro-chemical-seed companies are campaigning to take control of all seed genetics away from farmers and charge more for the pedigreed seed that is the foundation of Canada’s quality assurance system. At the same time, our major customers for grains, oil seeds, and pulses are turning their backs on our products. In spite of what some in the private trade loudly proclaim about recent events, running through all these issues is the common thread of credibility and trust.

Without the Canadian Wheat Board, the marketing for prairie grain has defaulted to the three or four giant grain companies dominating the world market. The two Canadian-based companies, Parrish and Heimbecker and J. I. Richardson International, have tried to fill the marketing gap left by the CWB, but on the world stage they are, to put it kindly, only mom-and-pop operations. They have little influence on either domestic policy or international events, as the recent problems with the Chinese canola market demonstrate.

The goal of the prairie grain export system, whether it was Board grains or non-board grains, was to have potential customer tenders specify “source: Canadian.” Most of the time this was achieved by using the Canadian Wheat Board and three interlocked government agencies – Agriculture Canada, the Canadian Grain Commission, and the Canadian International Grains Institute.

First is Agriculture Canada plant breeding and research stations across Canada. They provide impartial seed breeding done in the interests of farmers and our international customers.

Second and most important is the Canadian Grain Commission. It provided an independent and impartial third-party verification of the quality of grain loaded into export ships. The CGC’s “Certificate Final” carried the prestige and authority of the Government of Canada and was respected around the world. Customers could rely on the fact that a Canadian grain shipment contained exactly what the CGC’s inspectors specified and nothing else. The Certificate Final made buyers trust the quality of Canadian grain.

Third is the Canadian International Grains Institute. Each fall CIGI gathered representative samples of the principle grains grown on the prairie to provide information to potential customers. If a noodle maker in Asia was interested in wheat, the CWB would often fly them to the prairies to meet some farmers who had grown the grain they were interested in purchasing. Then at the CIGI offices in Winnipeg this potential buyer would see a sample of the grain milled and processed in the demonstration-scale flour mills, pasta machines, or, in the case of malt barley, a brewery. So our customer left Canada with the specifications for how to set their factory to obtain the best quality product using the specific Canadian grain they purchased and with the confidence it would be delivered as promised.

For Board grains the Canadian Wheat Board provided marketing, financing, and customer follow up. Prairie farmers grained all the advantages of having the beneficial ownership of their grain from farm gate to the customer’s terminal. Offices in Japan, China, and Europe allowed the CWB to have on-site staff familiar with customers and their cultures. It should be remembered that CWB staff often assisted other Canadian grain exporters in navigating the labyrinth of the international grain trade.

If something went amiss in that long chain, CWB staff were nearby to the destination and had the authority and ability to rectify any short comings. This interconnected efficient system gave Canada the credibility to boast our farmers were “feeding the world” and gave international customers the incentive to specify “source: Canadian” for grain purchases.

One of the policy achievements of the Harper Government was putting in motion the privatization of Canada’s agricultural export system - a process the Ottawa Liberals have been continuing. Now the consequences of that privatization policy are coming home to prairie farmers as crashing prices for canola, pulses, and durum wheat. If present trends continue, can hard red spring wheat be far behind?

It is so bad on the prairies even the urban media notices China no longer wants to buy prairie canola. Sadly, the media cannot remember three years ago the Chinese complained about too much dockage (stems, chaff and other foreign material) in canola shipments. A customer wanting a cleaner product is apparently not sexy enough for some of the media. Instead, they opted for a narrative based on a byzantine spy thriller involving the arrest of a Chinese executive years after the dirty canola issue was raised.

Two years ago, India stopped buying Canadian lentils and other pulses for much the same reason (not clean enough). Between India and China, the problem of too much dockage has effectively crippled almost all those prairie exports. The 80% world market share Canada often enjoyed for its high-quality durum (pasta) wheat is also effectively lost for much the same reasons.

The disastrous loss of these markets boils down to the fact Canada has lost its credibility in the international grain market. Canada is no longer seen as a trusted supplier of high-quality grains. The reason for this is very simple: aside from a couple of mom-and-pop operations, Canada doesn’t market its own grain anymore. That has been out-sourced to the giant multinational grain companies.

Why would these giants not want to keep the Canadian quality assurance system? After succeeding in killing the CWB, why are their friends and representatives pushing to merge CIGI with the private trade dominated Cereals Canada, and why are they working to undermine the Canadian Grain Commission?

The answer is clear. They have no desire to service any customer tenders that specify “source: Canadian.” It enhances their profits to have all tenders specify “source: optional.” This is because it allows them to fill tenders based on where in the world’s grain growing areas they can purchase grain from farmers at the cheapest price and then flip it to the customer for the biggest corporate profit. This is their business model and for the past 120 years it has been very successful for their owners and shareholders. With the end of the Canadian Wheat Board, grain companies are now in a position to take huge profits out of the Canadian prairies. Both the Harper and Trudeau administrations have played right into their hands by destroying Canada’s international credibility that made customers specify “source: Canadian.”

For prairie farmers this means a lot less income and being forced to realize, as canola producers are learning, that there are many sources of oil seeds and other grains around the world. Without a trusted quality assurance system, Canada cannot bully or humiliate potential customers into specifying “source: Canadian.”