The History of the Canadian Wheat Board

1
The History of the Canadian Wheat Board

• By Haydn Sanchez Avery

2
The Origins of the Wheat Board

• Historically in Canada, however, while individual
  farmers were at the mercy of market conditions,
  elevator operators and other stock market
  speculators were able to take advantage of the
  situation through hedging and futures trading on
  the market. For example, elevator operators would
  buy the grain from the farmers, keep the grain in
  storage, and then sell to a buyer when prices
  rose.?
• ?In 1917, the Canadian government attempted to
  put a stop to market speculation on grain by
  setting up the Board of Grain Supervisors. The
  Board operated on the same principles as the
  current Wheat Board trading on wheat futures was
  suspended, and the Board assumed control over the
  collection, delivery, and selling of wheat for
  export. The idea of an initial payment to farmers
  was also introduced at this time, as the Board
  was unable to determine the final price of wheat
  until the completion of the crop year. 
• In 1919, the federal government replaced the
  Board of Grain with the first Canadian Wheat
  Board, which operated by the same
  principles.While farmers supported the
  introduction of government controls over grain
  marketing, the Canadian government viewed this as
  a temporary measure, undertaken to prevent
  speculation and hoarding which could lead to
  worldwide food shortages in the aftermath of
  World War I.
• The government dismantled the Canadian Wheat
  Board at the end of the 1919-20 crop year.
  Farmers responded with several efforts to reform
  the system, both at the political level and
  through the creation of wheat Pools.

3
Formation of Wheat Pools

• Throughout the 1920s, the provincial governments
  of Alberta, Saskatchewan, and Manitoba oversaw
  the creation of Wheat Pools.
• The concept behind the Pools was the same as the
  Canadian Wheat Board that farmers would benefit
  from pooling their wheat and having all sales
  handled through a central selling agency.
• The Pools also followed the example established
  by the Canadian Wheat Board in providing farmers
  with an initial payment. While membership was
  voluntary, by the end of the 1920s the three
  Pools were handling approximately 50 percent of
  Prairie wheat.

4
The Political Level

• In the 1920s, several farmer-based political
  parties achieved a measure of electoral success
  that would prove crucial to developments. At the
  federal level, the Progressive Party elected 64
  MPs in the 1921 Federal election.
• In the House of Commons, the Progressive Party
  lobbied for a return of the Canadian Wheat Board.
  Ultimately however, the Party was unable to have
  a significant impact on federal policies.?
• Farmer-based parties, however, experienced
  greater success at the provincial level.
• The United Farmers of Alberta led the Alberta
  government from 1921 to 1935, while the United
  Farmers of Manitoba (which subsequently became
  the Progressive Party of Manitoba), won the 1922
  election.
• While less successful in Saskatchewan,
  farm-based political parties elected several
  members to the Saskatchewan provincial
  legislature throughout the 1920s and 1930s. The
  influence of these parties on government policy
  led to the creation of Prairie Wheat Pools.

5
The Depression

• During the Great Depression of the 1930s, the
  price of wheat fell to record lows. In the
  Prairie provinces, the impact of the Great
  Depression was worsened by a severe drought that
  lasted for most of the decade. The combination of
  the Depression and the drought was devastating to
  Prairie farmers, who were faced with low crop
  yields and reduced prices for the wheat they did
  have to sell.
• The economic upheaval of the 1930s also resulted
  in financial disaster for the Wheat Pools.
  Overestimating the price of wheat for 1929 (the
  year of the stock market crash), the Pools were
  forced to take out major loans from the banks to
  pay farmers. However, as wheat prices continued
  falling throughout the 1930s, the Pools were
  unable to meet the loan payments. The Prairie
  provincial governments guaranteed bank loans to
  the Wheat Pools, and then turned to the federal
  government for assistance.
• In 1935, the federal Conservative government, led
  by R.B. Bennett, took action, introducing
  legislation to create the Canadian Wheat Board.

6
Structure of the Canadian Wheat Board

• In 1935, Canada passed the Canadian Wheat Board
  Act. Since its passage, the legislation has been
  amended several times. Additionally, the Act
  gives the Canadian Wheat Board greater potential
  powers, in terms of the types of grains and the
  specific provinces and geographical regions that
  it has jurisdiction over, than have been
  exercised to date. The following provides an
  overview of the main features of the Act, and how
  it is applied
• The Canadian Wheat Board enjoys a monopoly over
  the marketing of designated grains meant for
  human consumption, both domestically and for the
  export market, in designated areas.
• While the Board currently maintains a marketing
  monopoly over wheat and barley, under the
  legislation its authority can be extended to
  cover other crops including oats, rye, flaxseed,
  rapeseed, and canola.
• The Board monopoly covers the designated grains
  grown in the provinces of Alberta, Saskatchewan,
  Manitoba, and the Peace River district of British
  Columbia.
• Under the legislation, the Board authority may be
  extended to cover designated grains grown in
  parts of Ontario and other sections of British
  Columbia.
• Participation in the Wheat Board is mandatory.
  With the minor exception of domestic feed grains
  (which are not for human consumption), Western
  farmers must sell their wheat and barley to the
  Canadian Wheat Board.
• For each crop year, the federal government
  guarantees to cover any financial losses incurred
  by the Canadian Wheat Board.
• Any profits, however, are returned to the
  producers (farmers) who delivered grain to the
  Board during the crop year.

7
The Legislation of the Canadian Wheat Board

• The legislation, further, outlines the Boards
  corporate structure
• The Board has a shared governance corporate
  structure, where responsibility for the
  management and operation of the Canadian Wheat
  Board is shared between the Board and the federal
  government.
• There are 15 members on the Board of Directors.
  Ten members are directly elected by farmers. Each
  elected director represents a specific regional
  district, and serves a four-year term.
• The remaining five members, including one member
  who serves as both President and Chief Executive
  Officer (CEO), are appointed by the federal
  Cabinet.
• The Board of Directors is responsible for the
  day-to-day running of the Canadian Wheat Board.
• However, the Act gives the federal government
  final authority over the direction and operation
  of the Canadian Wheat Board, stating that the
  Governor in Council, may, by order, direct the
  Corporation with respect to the manner in which
  any of its operations, powers, and duties under
  this Act shall be conducted, exercised, or
  performed.
• The Board is required to file an annual financial
  plan with the Minister of Finance, and monthly
  reports disclosing grain purchases and sales.
• The Board is also required to file an Annual
  Report with the federal Minister designated to be
  responsible for the Canadian Wheat Board,
  outlining the performance of the Board for that
  crop year the report is then submitted to
  Parliament.
• In the international arena, Canada has used the
  revised corporate structure as evidence the
  Canadian Wheat Board is essentially a
  farmer-governed organization. However, while it
  is true that farmers elect two-thirds of the
  Board of Directors, ultimately, the Canadian
  Wheat Board is legally responsible to Parliament.

8
Evolution of the Canadian Wheat Board

• There have been several significant amendments to
  the structure of the Canadian Wheat Board as set
  out in the Canadian Wheat Board Act
• In 1943, the federal Parliament amends the
  legislation to make membership mandatory, instead
  of voluntary. This action is taken in conjunction
  with the federal government efforts to provide
  food aid during World War II. However, the
  mandatory requirement remains in place after the
  war.?
• In 1967, a subsequent amendment removes the
  five-year renewal clause, making the Canadian
  Wheat Board a permanent fixture.
• ?In 1998, a further amendment significantly
  alters the corporate structure of the Board.
  Under Bill C-4, the Canadian Wheat Board is
  deemed no longer to be a Crown Corporation, but
  operates under a shared governance structure. The
  most visible sign of the change lies in the
  make-up of the Board of Directors, which formerly
  consisted solely of federal appointees.?
• The 1998 legislation signals an attempt by the
  federal government to address concerns that the
  Canadian Wheat Board is not responsive enough to
  farmers. However, it reaffirms the federal
  government authority over the Canadian Wheat
  Board, and introduces the reporting requirements
  to the Ministers of Finance and Agriculture.

9
Total Amount of Wheat and Wheat Flour Exported,
Canada (in thousand tonnes)