End of Wheat Monopoly Might Boost Prices

October 3, 2012 03:50 PM

Canada’s wheat monopoly finally stops

The Canadian Wheat Board (CWB) monopoly ended on Aug. 1, and Canada’s wheat, durum and barley producers and grain companies will now make decisions based exclusively on market signals.

The shift should mean higher wheat prices for both U.S. and Canadian producers, says Shannon Schlecht, director of policy for U.S. Wheat Associates. Prior to the change, CWB had a marketing requirement for western Canadian producers.

The monopoly was the world’s last for wheat and small grains, following the demise of the Australian Wheat Board monopoly in 2008. "The U.S. will now compete with private companies in an open-market environment," Schlecht says.

The end of the monopoly could also mean a change in trade flows, both to Canadian and U.S. buyers. The U.S. is already Canada’s largest customer. Schlecht says U.S. wheat growers in states along the Canadian border are likely to be impacted the most from Canadian producer deliveries. All U.S. wheat, durum and barley growers are likely to benefit, however, he adds.

In time, the U.S. and Canada might become one large wheat market and production unit, but several issues need to be hammered out for that to occur. The U.S. already imported a fair amount of Canadian wheat prior to the action, while only small volumes of U.S. wheat moved into Canada.

Canada and the U.S. also have different grading systems, though both can apply to U.S. or Canadian grain.

The U.S. is the world’s fourth largest wheat producer, behind the European
Union, China and India. Canada ranks seventh, based on a 2008/09 to 2010/11 average. The U.S. is the world’s largest wheat exporter, with Canada No. 3.

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