Sunday, October 2, 2011
I recently read an article about prairie virtues that featured “The Code of the West” which reads in part: "Ask no more and give no less than honesty, courage, loyalty, generosity and fairness."
It’s high time some of the comments by the CWB and its supporters adhered to the Code. For example, a recent news release from the CWB features the ways the CWB says it saved farmers $35 million in grain transportation. I understand an organization wants to present the best image it can, but it should do it honestly and fairness. Here’s what I’m talking about:
1. The CWB states “every year, 17 to 20 million tonnes of wheat, worth between $5 billion and $8 billion, is shipped to Canadian ports and markets”.
The CWB is overstating its size. Over the last ten years the combined wheat and durum pool accounts ranged from 12.5 million tonnes to 20.2 million tonnes, averaging just above 17 million tonnes. They got the top end right but were “selective” on the bottom end, favouring a higher value from a more recent year. Too bad they said “every year”.
The dollar value or “worth” depends on what you’re measuring – and where. Total sales values include all the costs to get grain to buyers, sometimes including ocean freight to distant markets. Since the CWB is talking about the benefits to farmers on grain being shipped to ports, it should show the value of the crop net to the farmer – not the delivered value to China.
The $8 billion was the “total revenue” in the 2007-08 crop year. This includes barley (even though the news release was referring to wheat only) and includes all sales values including those made on a delivered basis (including terminal handling and ocean freight). Both these factors contribute to an overly “expanded” figure.
The real range of CWB returns at a farmgate level – net to farmers – is about $1.9 billion to $4.6 billion, averaging $2.8 billion. A far cry from $5 to $8 billion.
Self-aggrandizement at its finest.
2. The CWB says farmers save between $8 million and $12 million a year through the CWB's use of the Port of Churchill. This is about $25/tonne of grain shipped through Churchill. The argument is based on the net cost of moving grain from the “Churchill Catchment Area” – northeast Saskatchewan and a small part of western Manitoba. The single car freight rates from these shipping points tend to favour Churchill over Thunder Bay by about $4.00/tonne; the rest of the “savings” come from avoiding the cost of the St. Lawrence Seaway.
However, over the last eight years, the CWB program through Churchill was partly originated outside the Churchill Catchment Area; in fact, a portion came from as far away as Alberta. Particularly notable is that 17% of the Churchill durum program originated in Alberta. In 2004-05, 32% of the durum and 17% of the wheat shipped through Churchill came from Alberta. Much of this grain originated on CP rail in the south, meaning grain was shipped on three different railroads; loaded on CP Rail, transferred to CN Rail and then to Hudson Bay Rail. From these faraway points, Churchill is the highest cost route by as much as $13/tonne over Thunder Bay and $32/tonne over Vancouver (the more natural port for much of this grain). We assume there has been a similar shipping program from southern Saskatchewan, also at higher costs than suggested.
Also, something the CWB doesn’t see or include in its value analysis for Churchill is the multicar shipping incentives. Whereas the typical 50-car and 100-car rates are $4.00/tonne and $8.00/tonne below the single car rates, to Churchill they are only $1.50/tonne and $3.50/tonne lower. Since, as we know, the grain companies pay out in trucking premiums about the same amount in total as they gain in multicar shipping incentives, this makes the value of shipping through Churchill less attractive by as much as $4.50/tonne.
In theory, shipping through Churchill could save about $25/tonne. In reality, the evidence indicates the savings are actually much lower than that. In fact, a disciplined assessment could show it actually costs farmers more for the CWB to ship through Churchill than through other ports. Bottom line is there is evidence to indicate that the costs of going through Churchill are much higher than what the CWB is saying and therefore the benefit is much lower.
So this news release by the CWB says its saves farmers $35 million, but when you drill down and look at some related facts excluded from the release, the basic statement comes into doubt. This has been a mainstay of this debate – unsubstantiated “facts” from the CWB widely distributed by the media and supporters while facts and analysis that tells a far different story are basically ignored.
Another good example of this is a comment by CWB director Stewart Wells speaking at a CWB meeting in Regina about farmers competing in a free market: “We are guaranteed to get the lowest price every time for our commodity.” I think most rational people would agree that this is ridiculous, and yet I haven’t seen it countered or challenged in any other public forum or media.
If you have to embellish, create and/or ignore facts, perhaps you should take a hard look at what you’re really doing and ask yourself why you’re doing it. If CWB-supporting farmers and politicians rationally considered all the facts that are available, would they still support the CWB as fervently (and at times, irrationally) as they do?
“Ask no more and give no less than honesty, courage, loyalty, generosity and fairness."
Posted by John De Pape at 4:15 PM