Market power
A new study questions the power of monopoly power
The first economic study in some time to look into the value of the Canadian Wheat Board monopoly in exerting
market power and maximizing producers’ returns has just been completed by Richard Pedde, Saskatchewan farmer
and former New York derivatives trader, and Dr. Al Loyns, former agricultural economics professor at the University
of Manitoba. The full version was published by the University of Alberta’s Western Centre for Economic Research
and an abbreviated version by the C.D. Howe Institute. The full study is available at www.business.ualberta.ca/wcer.
The authors shared a draft version of the report with the Board, which raised concerns and objections, not reflected
in the final report. After it was issued, the Board sneered at its conclusions, its usual reaction to all criticism.
The authors said their objective was to determine if the Board’s alleged market power justifies the monopoly single
desk system. They concluded that compulsory delivery and single desk selling does not guarantee market power and
does not increase revenue of producers. The wheat and barley supply controlled by the Board is too small in world
terms to effect market power, and has dropped precipitously as a share of the world totals. Even if the Board at one
time possessed significant market influence it probably does not do so now. The markets into which the Board sells
wheat and barley have changed so substantially, as has the nature and amount of competition from other sellers. Some
Canadian grains might receive price premiums based on their quality of characteristics, but the Board and the single
desk system can hardly be credited for that.
Under Wheat Board control, Canada’s share of global wheat and barley sales has dropped sharply. In 1961 its wheat
production was a historic high of 8% of the world total. Now it under 4%. The Canadian share of world exports
dropped from over 25% to less than 14% over the same period.
The Wheat Board is a price-taker in many markets because the amount of grain it controls is not sufficient to allow it
to dictate prices. Unless the Board can provide independently-verifiable evidence to the contrary, the compulsory aspect
of the its mandate should be terminated. The report noted that “information gaps, voids and dead-ends” and the
“lack of detailed reporting” by the Board makes it very difficult to directly evaluate its performance. In non-Board
trade, while individual sales are likewise not
reported, there is enough data generated by
analysts, statistical agencies and futures markets
to allow a good understanding of market
price relationships.
Public positions of the Board are contradictory.
In Canada it says it can manipulate the
world market to the advantage of farmers, but
for external audiences it claims it is a fair
trader whose activities do not distort markets.
The report concludes that the current debate
around the monopoly issue wastes time and
resources and creates many opposing factions,
while “our trading partners and competitors
complain and react.”
“It is time for reform.”
From Agriweek
A new study questions the power of monopoly power
The first economic study in some time to look into the value of the Canadian Wheat Board monopoly in exerting
market power and maximizing producers’ returns has just been completed by Richard Pedde, Saskatchewan farmer
and former New York derivatives trader, and Dr. Al Loyns, former agricultural economics professor at the University
of Manitoba. The full version was published by the University of Alberta’s Western Centre for Economic Research
and an abbreviated version by the C.D. Howe Institute. The full study is available at www.business.ualberta.ca/wcer.
The authors shared a draft version of the report with the Board, which raised concerns and objections, not reflected
in the final report. After it was issued, the Board sneered at its conclusions, its usual reaction to all criticism.
The authors said their objective was to determine if the Board’s alleged market power justifies the monopoly single
desk system. They concluded that compulsory delivery and single desk selling does not guarantee market power and
does not increase revenue of producers. The wheat and barley supply controlled by the Board is too small in world
terms to effect market power, and has dropped precipitously as a share of the world totals. Even if the Board at one
time possessed significant market influence it probably does not do so now. The markets into which the Board sells
wheat and barley have changed so substantially, as has the nature and amount of competition from other sellers. Some
Canadian grains might receive price premiums based on their quality of characteristics, but the Board and the single
desk system can hardly be credited for that.
Under Wheat Board control, Canada’s share of global wheat and barley sales has dropped sharply. In 1961 its wheat
production was a historic high of 8% of the world total. Now it under 4%. The Canadian share of world exports
dropped from over 25% to less than 14% over the same period.
The Wheat Board is a price-taker in many markets because the amount of grain it controls is not sufficient to allow it
to dictate prices. Unless the Board can provide independently-verifiable evidence to the contrary, the compulsory aspect
of the its mandate should be terminated. The report noted that “information gaps, voids and dead-ends” and the
“lack of detailed reporting” by the Board makes it very difficult to directly evaluate its performance. In non-Board
trade, while individual sales are likewise not
reported, there is enough data generated by
analysts, statistical agencies and futures markets
to allow a good understanding of market
price relationships.
Public positions of the Board are contradictory.
In Canada it says it can manipulate the
world market to the advantage of farmers, but
for external audiences it claims it is a fair
trader whose activities do not distort markets.
The report concludes that the current debate
around the monopoly issue wastes time and
resources and creates many opposing factions,
while “our trading partners and competitors
complain and react.”
“It is time for reform.”
From Agriweek
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