Canadian Wheat Board asks government to assume 'hundreds of millions of dollars' in penalties for canceled grain contracts, staff pension, severance costs that would arise if board shuts down next year

Andrew Rogers

LOS ANGELES , August 4, 2011 (Industry Intelligence) – With the Canadian government looking to pass legislation in autumn ending the Canadian Wheat Board’s marketing monopoly on Western Canada’s wheat, barley and durum, the CWB has asked the government to assume ‘hundreds of millions of dollars’ in penalties related to canceled grain contracts and other expenses that it claims would result from the shut down next year, Reuters reported July 29.

If the government decides to remove the monopoly, CWB Chairman Allen Oberg says the board will close, regardless if a new organization with a different role takes its place. The removal of the CWB would force countries like China and Japan to purchase grain directly from Canadian grain handlers or go to other countries such as the United States, Australia and Russia.

For the 2011-2012 wheat crop, the CWB has already sold nearly 10% of its crop and Oberg says he has yet to hear of any impact the board’s uncertain future has had on sales. In addition to contract penalties, the CWB has asked the government to assume staff pension and severance costs, Oberg added, Reuters reported.

Last week, the CWB sent a letter to Agricultural Minister Gerry Ritz proposing 19 alternative ideas to the current model, though they added that none would benefit farmers as much as the current monopoly. One of the new ideas suggested that part of the CWB’s monopoly remain on export sales only, but there has been no intimation by the government that it would consider the idea.

Without regulated access to grain storage and handling facilities, the CWB believes it cannot compete with established handlers because it has no facilities of its own. Viterra Inc., Richardson International Ltd. and Cargill Inc. are the dominant players in the Canadian grain-handling market, with U.S.-based Bunge Ltd. looking to take a bigger role in the country when the board’s monopoly ends.

Canada is the world’s largest exporter of spring wheat, durum and malting barley. The CWB collected C$5.2 billion (US$5.4 billion) last year, but has no retained earnings, Reuters reported.

The primary source of this article is Reuters, New York, New York, on July 29, 2011.

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