Wheat Board Research Articles

The role of marketing boards in the industrialization of the Canadian agricultural system

Agricultural product marketing boards have emerged as a significant and somewhat unique institutional framework within the Canadian agricultural system during the last 70 years. That period coincides with the increasing industrialization of the system with respect to both its agribusiness and farm (production) sectors. The paper explores the relationships between the process of industrialization and the particular response represented by marketing board arrangements. The underlying premise is of a causal relationship, but one complicated by the changing goals of, and relationships between, the participants. Although marketing boards are seen as producer-initiated, at each stage their form and functions have been strongly influenced by the attitudes of agribusiness and the level of government involvement. Industrialization affecting agribusiness is seen as the initial stimulus to farmer actions which culminated in the Prairie Wheat Pools and the Canadian Wheat Board. Further consolidation by agribusiness, together with pressures on governments during the Depression, influenced the wave of provincial marketing boards, established during the early stages of farm-level industrialization. Most recently, since 1960, the latest stages of industrialization which have emphasized large scale, oligopolistic and multinational agribusiness, and the emergence of a minority of highly capitalized and specialized farm enterprises, has also seen the application of supply management, a more rigorous form of marketing control, to the dairy and poultry sectors. At present, however, marketing arrangements are under pressure from international trade agreements and from elements of multinational agri- business.

A METHOD FOR EVALUATING SUPPLY RESPONSE TO PRICE UNDERWRITING

In this paper a method for evaluating the supply response of individual producers to a price underwriting scheme is presented. The method includes precise formulae to take account of the impact of price underwriting on the producer's uncertain conditions. The Australian Wheat Board's guaranteed minimum price scheme is taken as a specific example of price underwriting in practice. Results show the scheme to lead to only relatively small supply responses. The impact on producer behaviour of an increase in price uncertainty in the presence of an underwriting scheme is also demonstrated in the paper.

A comparative study of the quality status of Condor Wheat grown in Northern Victoria and Southern New South Wales

Australian Wheat Board quality advisers had formed the opinion that Condor wheat (Trificum aestivum L.) grown in north-west Victoria possessed weaker dough properties than that grown in southern New South Wales, even at similar grain protein contents. Samples of commercially grown Condor wheat from north-west Victoria and southern New South Wales were collected by Australian Wheat Board field officers to objectively investigate this observation. Testing of these samples indicated Condor grown in north-west Victoria to have significantly weaker dough properties than that grown in southern New South Wales. Doughs were less tolerant to mixing in the farinograph and had reduced extensograph maximum resistance, even when there was no difference in protein content between the samples from the two regions. The reduced dough strength in the Victorian samples was associated with lower nitrogen: sulfur ratios and residue protein content and fewer rheologically important disuifide groups per 50 g of flour. These differences were presumed to have resulted from some aspect of the environment during plant growth and development.

A Perspective on Canadian Wheat Board Exports, Price Pooling, and West Coast Capacity Constraints

This paper illustrates that Canadian Wheat Board (CWB) price pooling provides an important function in western Canada, which is to redistribute returns from the scarce resource of west coast capacity to all western grain producers. The manner in which this distribution occurs has equity implications. A corollary is that the need for prairie wide price pooling by the CWB for distributional considerations diminishes as the west coast export constraint is eliminated. The analysis suggests another conclusion which is that the current set of grains should continue to be exported through only the CWB. Failing that, non‐CWB grain exports through the private market should share in the export constraint. Another distributional implication is that reductions in the capacity constraint disadvantages the western livestock industry.Cette étude démontre que l'établissement de la tarification par la Commission canadienne de blé exerce une fonction importante dans l'ouest canadien, qui est de redistribuer les revenues tirés des ressources réduites de la côte du ouest à tous les producteurs de grain dans l'ouest. La manière que cette distribution a lieu a des répercussions en matière d'équité. Un corollaire est que le besoin d'un établissement de la tarification dans les prairies par la Commission canadienne de blé pour des considérations de distribution diminue à mesure que la contrainte d'exportation de la côte de l'ouest est éliminée. L'analyse suggère une autre conclusion selon laquelle les variétés de grains actuelles devraient continuer à être exportées a travers la Commission canadienne de blé seulement. Sinon, les exportations de grains qui ne sont pas visées par la Commission canadienne de blé et que passent à travers le marché privé devraient assumer leur part dans la contrainte d'exportation. Une autre implication sur la distribution est que les réductions dans les contraintes de capacité désavantagent l'industrie d'élevage de l'ouest.

Measurement of fat and moisture in air‐dried bread by near infrared reflectance

AbstractNear infrared calibrations have been derived and used routinely for a year in the measurement of fat and moisture in air‐dried bread. First and second derivative calibrations were obtained using a Pacific Scientific mark II scanning spectrophotometer on samples sent from all over South Africa to the Wheat Board for analysis. Prediction analysis performed on further bread samples gave standard errors of prediction (s.e.p.) of 0.12% fat and 0.13% moisture.

Comparing International Market Performance: Conceptual and Measurement Issues

It has become fashionable to compare the performance of alternative marketing systems, particularly the grain-marketing systems of Canada and the United States (McCalla and Schmitz, Peltier and Anderson, Food West Resource Consultants, Dever). This is not surprising given that there have been proposals to give a centralized agency, e.g., the Commodity Credit Corporation or an entity like the Canadian or Australian Wheat Boards, some degree of responsibility for marketing U.S. grain. Conversely, there are numerous proposals in Canada to reduce the marketing responsibility of the Canadian Wheat Board (CWB) and to alter other elements of the grain-marketing system.' With such pressures it is appropriate and necessary that performance comparisons be made. But to do so requires that two questions be answered: how does one conceptualize performance and how does one measure it? The objectives of this paper are: (a) to present a process for arriving at a conceptual framework for comparing performance, (b) to suggest a conceptual framework in the form of performance objectives for comparing grain market performance, and (c) to suggest a series of measurable performance indicators.

Public intervention in agricultural marketing: A decision model for a commodity corporation

This paper is concerned with the improvement of the agricultural market structure in developing countries. At present the marketing of agricultural produce in such countries is often left to small private traders where the result is an inefficient system leading to low prices to the producer and shortages and too high prices to the consumer. It is suggested that the setting up of commodity corporations or marketing boards could overcome most of these difficulties. The Canadian Wheat Board is offered as an example of an efficient system working well for the producers and private traders. The paper concludes by outlining a decision model for a commodity corporation or marketing board.

Clark King & Co. Pty Ltd v. Australian Wheat Board

Clark King & Co. Pty Ltd v. Australian Wheat Board

Grain Marketing Systems: The Case of the United States versus Canada

AbstractThis paper compares the U.S. and Canadian grain‐marketing systems, emphasizing wheat. The historical evolution of each system is first presented; then each system's performance is evaluated using such criteria as producer prices and export market shares. The particular marketing system by itself is not the only determinant of performance differences of the two systems; government policies also play a role. Furthermore, the two marketing systems do not operate independently of each other. Often the Canadian Wheat Board uses the private system in the United States to carry out the delivery of grain once sales have been made; also, at times, the Board has made direct sales to U.S. grain firms.

A Theory of Nonmarket Failure: Framework for Implementation Analysis

THE principal rationale for public policy intervention lies in the inadequacies of market outcomes. Yet this rationale is really only a necessary, not a sufficient, condition for policy formulation.1 Policy formulation properly requires that the realized inadequacies of market outcomes be compared with the potential inadequacies of nonmarket efforts to ameliorate them. The "anatomy" of market failure provides only limited help in prescribing therapies for government success.2 That markets may fail to produce either economically optimal or socially desirable outcomes has been elaborated in a well-known and voluminous

The Soviet burden on the world food system: Challenge and response

Through its disruptive entry into western food markets and its non —participation in global efforts at food policy management the Soviet Union has placed a burden upon the world food system. Dr Paarlberg examines this burden and the US response which has been to seek better information on Soviet agriculture, impose ad hoc controls on food sales and to enter a bilateral agreement in 1975. Three other suggested responses —grain reserves held without Soviet participation, a US wheat board, and a North American export cartel —are discussed. The author concludes that the Soviet burden is decreasing and is best lifted by increasing the free supply available for export. In future. Soviet reliance on food imports may draw it into a greater dependence on the non-socialist world.

Acreage Response to Policy Variables in the Prairie Provinces

Several recent attempts have been made to estimate the acreage response of Canadian wheat, oats, and barley to changes in price (Capel, Schmitz, Schmitz and Bawden, Missiaen and Coffing). The estimated elasticities of wheat acreage response to wheat price have been found to vary from 0.42 to 0.88 in the short run and from 0.62 to 1.30 in the long run. The wide range of elasticity estimates are due in part to the different definitions of wheat price employed in each study.' Capel used the Canadian Wheat Board international wheat agreement price for No. 2 northern wheat during March at Fort William. Schmitz used the latest final price (including the final payment) prior to seeding, while Missiaen and Coffing used the farm price of wheat lagged one year as did Schmitz and Bawden. Since there seems to be disagreement about which price farmers respond to, a short discussion of Canadian grain pricing practices may be useful. The Canadian Wheat Board is a crown corporation with monopoly control over the marketing of wheat, barley, and oats produced in the Prairie provinces and the Peace River area of British Columbia. The board pays producers an initial payment for grain delivered to it, pools the grain for sale, and returns the profits from the pool to producers in a final payment. The initial payment is a floor price with the Canadian government making up the difference if the average selling price is below the initial payment (Missiaen and Coffing).2 Initial plus adjustment payments for wheat have ranged from $1.40 to $3.75 per bushel between the 1949-50 and 1973-74 crop years.3 Proceeds over and above the initial plus adjustment payment are paid to producers in a final payment made approximately eighteen to twenty-four months after the crop is planted. Final plus interim payments for wheat since 1949-50 have ranged from nothing on the 1968-69 pool to 82.8o per bushel on the 1973-74 pool.4 Barley and oats are handled in a similar mann r to wheat, although in separate pools. Given these pricing practices of the Canadian Whe t Board, it is hypothesized that grain producers react to two different prices in determining what crops and how much to plant: the initial plus adjustment payment, which has been quite stable, and the final plus interim payment.5 None of the acreage response studies mentioned earlier differentiate between farmers' reactions to changes in initial paym nts and changes in final payments. This paper reports on a study undertaken to determine if Prairie farmers react differently to ch nges in initial and final payments in making their wheat, oats, and barley planting decisions. To test this hypothesis, acreage response functions are estimated using initial and final payments as separate variables. These functions are then compared in terms of expected signs, goodness of fit, and estimated elasticities to response functions incorporating only one price variable. If farmers do react differently to changes in initial and final payments, this information can be used to influence the acre-

Discussion of Market Implications

The two papers presented at this session contain many points with which I can only agree, but also some thoughts with which one can take issue. In line with this, I would like first to share some thoughts that occurred to me while reading the two papers, and then add some observations made from my specific vantage point as financially-oriented researcher and investment analyst in a major agribusiness firm. The Barry/Fraser paper focuses on increased price variability for the farmers' products as an indicator that financial risk in primary agricultural production has increased. Furthermore, the paper discusses risk management primarily in terms of minimizing price variability and stabilizing expected returns. I contend that price variability, in itself and without reference to the corresponding cost of production, does not prove that the probability of incurring a financial loss has increased. It merely establishes the fact that it will statistically be more difficult to obtain the highest price possible. As a case in point, aggregate net farm income during the years 1973 and 1974 has reached unprecedented heights, both in absolute dollars and in relation to assets employed. This was not the result of a very sudden increased sophistication on the part of farmers to deal with the greater product price variability. The coefficients of variation for the annual mean prices shown in table 1 of the Barry/ Fraser paper are meaningless in my opinion because they are influenced heavily by the length of period selected for analysis and by the underlying secular trend in price levels. The paper points to a growth of over 1200% in debt per farm between 1950 and 1975 and a payback period of nearly three years for this debt as indicators of decreasing ability of the farm sector to absorb financial risks. But comparing statistics from the U.S. Department of Agriculture's Balance Sheet of the Farming Sector 1974 with comparable data for the Grain Processing Industry (SIC 2041) and the Agricultural Merchandising Sector, it beomes evident that these other sectors operate on a smaller gross profit margin and a much thinner cushion of financial reserves. This is what made it mandatory for them to devote major efforts to the task of risk management. Considering relative strength of net worth, it would take only a small fraction of the unhedged decline in the price of commodities to completely wipe out the net worth of a merchandising firm, compared to the decline necessary to completely dissipate the net worth of the farmer (see table 1). Barry/Fraser also suggest that more frequent sequential marketing can reduce risk, which is correct if we assume that risk aversion is the ultimate goal. But sequential marketing does not optimize prices. It is an averaging procedure that only guarantees that something better than the lowest price will be obtained. Maybe this explains why pooling results achieved by the cooperatives, as well as by the Canadian and Australian Wheat Boards, have been mediocre at best. Professor Gray's paper emphasizes institutional factors and the role of organized futures markets. I agree with his comments both in regard to the value of these institutions to our society and to the limitations still remaining. But in regard, for instance, to the lack of a sorghum futures contract, a broader definition by the Commodity Futures Trading Commission of bona fide hedging could do much to alleviate the present problem. Cross-hedging sorghum in corn futures gives essentially as much price protection as can be obtained hedging corn in corn futures. Another problem mentioned is the need for added margin calls to hedgers during periods of adverse price movements. It would seem there should be an objective reappraisal of using commodity options to deal with this problem. (Obviously, I would be opposed to dealing in naked options.) The hedger would in effect have already purchased with the option all additional margin potentially due if the market changes required it. Konrad Biedermann is the director of planning at the Continental Grain Company, New York.

Government Grain Programs of Canada, Australia, Japan, and the United Kingdom

The government grain programs of Canada and Australia, two important grain-exporting countries, and those of Japan and the United Kingdom, two important grain-importing countries, illustrate the variation in foreign government grain programs. Although all four countries have producer support prices, Canada and Australia have Wheat Boards, monopolistic in form, which buy grain from producers, the U.K. has no direct purchase of grain by the government, and Japan has a mixed system. Support prices in Canada are based on expected market conditions, in Australia on cost of production, and in Japan on a parity concept; in the U.K. they are set at the annual government price review. Both the Australian and Japanese governments are attempting to stimulate grain production, while the Canadian delivery-quota system tends to limits production. The U.K. has no specific government policy on grain production. Australia and Canada have programs to promote exports. All four countries have some form of import duties on grain.

The Registration of the Wheat Board for the Baking Industry

The Registration of the Wheat Board for the Baking Industry

How Much Has the Canadian Wheat Board Cost the Canadian Farmers?

How Much Has the Canadian Wheat Board Cost the Canadian Farmers?

The Nolan Case

This paper owes its origin to pure curiosity on the part of the writer about the construction placed upon the National Emergency Transitional Powers Act, 1945, by the Judicial Committee of the Privy Council. It is somewhat remarkable that eleven eminent Canadian jurists out of thirteen should agree substantially in their interpretation of this Canadian statute and that their opinions should be decisively, one might say emphatically, rejected by the Committee.The Nolan Case, as it is commonly known, came before the Chief Justice of the Trial Division of the Court of King's Bench of Manitoba in March, 1948. The question to be determined was whether the Canadian Government, acting through the Wheat Board, could legally appropriate 40,000 bushels of western barley belonging to a grain merchant named Nolan under the powers conferred upon it by the National Emergency Transitional Powers Act. The trial judge in a closely argued opinion held that the federal administration had exceeded its powers. This decision was appealed by the Government in the Manitoba Court of Appeal where the five justices, unanimously and in strong terms, upheld the verdict of the trial court. On a further appeal to the Supreme Court of Canada five Supreme Court justices, including the Chief Justice, out of seven who sat on the appeal, rejected the contentions of the Government.

The Canadian Agricultural Price Support Programme

Much of the activity relating to the support of agricultural prices in Canada is conducted under the authority of the Wheat Board Act and the Agricultural Prices Support Act, but the programme in its broadest sense involves other legislation and a variety of government policies. Part of this programme originated in the inter-war period and earlier years. This paper, dealing with various aspects of the programme, is introduced by a brief outline of background developments.Governments, both federal and provincial, have traditionally been concerned in the main with activities aimed at increasing efficiency in the production and marketing of farm products. These have included experimental and scientific research; efforts to improve the quality of plants and animals; the introduction and enforcement of grades and standards for marketing; and extension work designed to acquaint farmers with useful information as it became available.During the First World War this pattern of activity was enlarged. At that time the federal Government took over control of the marketing of wheat. It gave to a body known as the Board of Grain Supervisors authority to fix the prices and to market the crops of 1917 and 1918. This proved to be the forerunner of a development that has since come to occupy an important place in government activity.

The Proposal to Market Coarse Grains through the Canadian Wheat Board

HE Government of Canada has recently announced its intention, beginning with the new crop year starting August 1, 1949, of making the Canadian Wheat Board the sole marketing agency for oats and barley produced and sold in the Prairie Provinces of Manitoba, Saskatchewan and Alberta. Since September of 1943 the Wheat Board has been the sole marketing agency for wheat in this designated area. The initial price paid to the producer has been fixed by the Governor-in-Council, that is, the Cabinet, while surpluses realized on the disposal of this wheat have, after the deduction of expenses, been pro-rated back to those farmers delivering wheat. The cash and futures markets are closed. Although the ownership of the elevator system remains in the hands of private firms, or co-operatives, the Canadian Wheat Board Act of 1935 confers upon the Board the power to regulate the deliveries of wheat, oats, barley, rye and flaxseed to these elevators. The Board issues a delivery permit book to each farmer and may, at its discretion, establish delivery quotas. Also, the Board may require that, unless delivered under a permit book, grain may not be loaded onto a railway car without the permission of the Board. The Act gives the Board a monopoly over all inter-provincial and export trade in wheat and by an amendment of March 19, 1948, extends this monopoly to oats and barley.' At the time of writing, trading on the Winnipeg Grain Exchange in cash and futures contracts for all grains, other than wheat, is still taking place.2 It is assumed that with the Board undertaking the marketing of oats and barley produced in the designated area in interprovincial and export trade the cash and futures market will not be able to operate once existing contracts are cleared. Although Bill 135 was passed more than a year ago the Government refused to proclaim this amendment until the governments

Stabilization of the Income of the Primary Producer

The large part of Canadian experience with controls affecting primary products has been acquired under the peculiar conditions of war. With expanding income in the hands of consumers, prices generally rose rapidly during 1941, and the general price ceiling was established in December of that year. Since then the incomes of consumers have continued to expand, and the general ceiling has been supported by taxation, borrowing, and informal and formal rationing. However, given the ceiling and the level of spendable incomes on the one hand, and the supplies of labour and equipment available to producers on the other, producers' prices were frequently too low to induce sufficient production to prevent the necessity of more extended formal rationing; to provide for desired expansion in domestic consumption, and to meet the urgent need for food for export. Producers' prices have therefore been supported; the object of the supports being primarily to direct production in line with the national policy, and only incidentally to raise producers' incomes. In a few cases, notably, wheat and apples, supported prices have been applied to maintain incomes against a decline in demand. The price of wheat has been supported by stock accumulation, quotas, and acreage reduction. Apples have been purchased and diverted to alternative markets.In 1942, wheat, dairy products, hogs, cattle, and poultry products together provided more than 70 per cent of the gross, cash income from the sale of farm products in Canada. Wheat has been purchased by the Canadian Wheat Board at a fixed statutory price. Minimum prices have been established for beef and butter, which are sold mainly on the domestic market; export contracts assisting in clearing the Canadian market of surpluses. Prices of hogs, cheese, and eggs have been supported by contract prices agreed upon by the British Ministry of Food, and financed largely under the provisions of Mutual Aid.