U.S. and Canada wheat production stirs controversy
The U.S. and Canada tend to get along very well—but sometimes even the best of neighbors have disagreements. The wheat industry finds itself wrapped in controversy as farmers on both sides of the border struggle to buy varieties and sell their grain fairly.
"This issue has been around for a long time," says Vince Smith, an agricultural economics professor with Montana State University, who has been tracking the marketing squabbles and trade disputes between the two countries throughout the years.
Smith says an important change came this past August, with the implementation of the Marketing Freedom for Grain Farmers Act in Canada. This act changed the way western Canadian wheat and barley farmers market their grain by removing the mandatory requirement to sell their crops through the Canadian Wheat Board (CWB). The CWB has been the sole buyer of Canadian wheat since 1935, but now farmers have more options when marketing their crops.
The resulting import and export implications are complex: "It’s not completely clear what the rules are," Smith says. Some of the new marketing guidelines are spelled out in the FAQs section at http://canada-usgrain andseedtrade.info.
Dismantling the CWB’s monopoly has not been a comprehensive solution, either. Grading inconsistencies between the U.S. and Canada are a concern for some farmers who want to market their crop in both countries, such as Montana wheat farmer Gordon Stoner.
"The problem going north right now is the Canadian varietal act," Stoner told the Billings Gazette.
"To get a grade, wheat in Canada must be an approved variety. If it’s not, it has to be graded as [lower value] feed wheat."
Meantime, Smith says that although there are positive aspects of the CWB’s demise, he is also bracing for some potential unintended consequences of the change. As a matter of marketing policy, CWB restricted the range of varieties Canadian farmers could plant. One outcome of this policy is that the majority of row crop production in Saskatchewan, Manitoba and Alberta has incentives to plant hard red winter wheat or canola. Now, these incentives might shift.
"The much bigger issue over the next few years is, will Canadian growers demand and receive wider options on what they can plant?" Smith says.
It won’t happen overnight, but if Canada taps into hard red spring wheat varieties, the country could significantly affect the market—resulting in an influx of as much as 20% more red spring wheat, Smith adds. That could jeopardize the premium market that hard red spring wheat farmers in states such as North Dakota and Montana currently enjoy.
"I’m more concerned with the long-term implications of the demise of the CWB than the short-term grain-handling issues," Smith says.
Other areas to watch. North Dakota State University crop economist Frayne Olson says Canada is just one of several wheat-growing regions to keep an eye on.
"The world wheat market is very liquid," he says. "There are a lot of buyers and a lot of sellers. Because of that, the market factors can be more complex than corn or soybeans."
- Late Spring 2013