An interview with the Frontier Centre For Public Policy;

FC: You’ve expressed reservations about “relying too much on economists.” Don’t competent economists use real-world numbers? Shouldn’t we distinguish between good economists and poor ones?
JD: What I don’t like about econometric models is that they can’t be relied upon to take into consideration every possible influence or impact on the issues being studied. For example, no economic model addressing the market power of the CWB’s single desk has ever taken into consideration the fact that the single desk is operated by people. People who, as bright and dedicated as they are, make mistakes and poor judgment calls, use poor timing or simply miss the odd phone call.
The Recent U. of S. study uses real data to build an economic model based on market elasticities. This study tells in theory what the prices in different markets should be based on a single-desk seller and then in a multiple-seller environment. But for the CWB salespeople to act in the manner theorized, they would need to have complete and perfect information about every market they are selling into, every competitor and their possible behaviour, every possible substitution and every price elasticity of demand in every market. At all times. That is the only way the model works.
In addition, these models don’t consider things like the application of higher grades of grain in satisfaction of a sale of lower grades; this happens from time to time, yet I have not seen an economic model that considers it. Don’t get me wrong – economists do great work. Unfortunately, the CWB relies on these theoretical constructs to prove its worth instead of using real business measurements that are easily calculated. Even their benchmarking exercise was shown to be flawed.
FC: A dual market already exists in domestic feed barley, with only 20 percent of all Western Canadian barley going through the Board. Does that mean our system is better prepared for free barley than for free wheat?
JD: Absolutely. Many in this business – on both sides of the debate – acknowledge that barley is different than wheat. I would say that the time for the barley market to be free of the controls of the CWB came some time ago.
FC: The numbers you present show farmer costs for marketing canola, a non-Board crop, at roughly $40 a tonne. But Board costs for wheat come in at around $58, barley is estimated at $60 and durum at $70. That tells quite a tale about Wheat Board efficiency. Why are the Board’s services so much more expensive?
JD: There are three main factors here. First, much of what the CWB does is redundant. The grain companies market non-CWB grains to earn an elevation. The CWB markets wheat and barley at a cost, but also pay the grain companies for terminal handling and storage while grain companies also charge farmers for country elevation and cleaning. Second, the handling charges by the grain companies are greater on CWB grains than they are on non-CWB grains such as canola because they don’t have the same operational and marketing tools available to manage their space on CWB grains. And third, any costs incurred by the CWB making mistakes are passed onto the farmer. If a grain company makes a mistake, competition does not allow them to recoup the losses through charging farmers more or paying them less.

You can read the rest here.

Background, via a reader: “The Ag minister wrote an op-ed letter in January, wherein he made certain price comparisons on wheat. The CWB is mass mailing prairie newspapers in reply. But instead of trying to directly challenge the comments made by Strahl, the CWB is trying to “correct” the newspaper’s “erroneous price comparisons”. Here’s what happens when one editor points out that the CWB ought to state that Strahl had his numbers wrong. Enjoy!”
Correspondence with a Saskatchewan weekly newspaper from Heather Frayne, CWB Communications Consultant:

(1) Heather Frayne original letter:
Woops. Sent you the wrong letter. Here is the right one. (She had first sent the one intended for the Whitewood Herald).
Heather Frayne
CWB communications consultant (acting)
__________________

The following is a letter to the editor regarding erroneous price comparisons in an article in the January 24 issue of The ***.
It was suggested in the January 24 issue of the *** that an Ontario farmer currently selling hard red spring wheat with 13.5 per cent protein would receive $5.50 per bushel, whereas a grower on the Prairies selling 1CWRS would receive about $4.40 per bushel as a final pool return – approximately $1.10 less. The implication is that this is because of poor performance by the CWB. That implication is incorrect, because of several errors in the comparison.
To begin with, the comparison relates a spot price (the Ontario price) to a pool value (the CWB Pool Return Outlook). This is a misleading comparison. A pool value is by definition an average of prices achieved over an entire crop year. In a rising market such as we have experienced so far this crop year, a spot price is always higher than a pooled price. Is the CWB selling wheat at those “high” Ontario values and returning those dollars to farmers? Yes. In fact, CWB values are even higher, as noted below.
The Ontario farmer spot price of $5.50 per bushel is presumably a price at or near an Ontario mill. Therefore, an appropriate comparison would be the current price of CWB wheat landed at an Ontario mill. On February 5, the CWB offered eastern mills No.1 CWRS with 13.5 per cent protein for $230.47 per tonne at Thunder Bay. Add to this freight charges of $25 from Thunder Bay to the mill, and the landed price equals $255.47 per tonne or $6.95 per bushel.
The comparison, then, is between $5.50 per bushel of hard red spring wheat to the Ontario farmer and $6.95 per bushel for CWB wheat sold in Ontario. This $6.95 per bushel would be added to the pooled payments western farmers receive for wheat sold throughout the 2006-07 crop year.
Because the CWB’s Ontario sales prices are based on competitive North American values, western farmers can obtain similar cash values today under the CWB’s other pricing options such as our Daily Price Contract.
It appears that Ontario farmers are receiving prices that are significantly under current market values.
The truth, therefore, is the exact opposite: CWB prices are higher.
Sincerely,
Gord Flaten,
CWB Vice-President, Marketing
Heather Frayne
CWB communications consultant (acting)
(2) Editor’s Reply:
Hi Heather,
I looked for the article in question. The information appeared, not in an internally generated piece, but in an op-ed provided by Chuck Strahl, our minister of agriculture. As a hint, and since I know you’re sending this to everyone who runs the op-eds from Strahl, if you want editors to run your piece, you should not try to make it look like we made a mistake – since we didn’t! If you want to reword your letter to be more accurate – that being that ‘in an article by Chuck Strahl, minister of agriculture, which appeared in many publications in Saskatchewan,’ … you might actually have a shot
at getting your side in print. As it is now .. best of luck, you’ll need it.
(3) Letter from Heather Frayne:
Hi **,
I just called 306-** and left a message for you with a man whose name I didn’t catch. He said he would ask you to call when you get back in.
I appreciate your comments, and agree absolutely that more specific information would have been useful and appropriate. Unfortunately, because of the gag order and the political environment in which we’re trying to operate, I wasn’t at liberty to include those details. In other words, I’m relying on editors and publishers to understand the reference–like you, most are well aware of what they’ve published and what they haven’t–and joining the dots for their readers.
So… all the best. And my apologies for the awkwardness.
(4) Editor’s Reply:
Hello Heather,
What gag order would that be? The one that says that you cannot bad-mouth your boss – the minister of agriculture, Chuck Strahl? … I know it must be frustrating to try to mount a campaign against the guy who signs your pay checks, but I do not believe in ‘inferences.’ To run your letter without being specific, not only serves to make me look bad, it serves to make you look bad as well.
(5) Heather Frayne Reply:
You are, of course, under no obligation to correct misinformation that you have previously published.
I, like all employees of the CWB, am paid by the farmers of western Canada for whom I work, not by the Minister of Agriculture.
(6) Editor’s Reply:
I didn’t say you worked for him, I said he signed your pay checks.
You know something Heather, better still, why don’t you take this up with Chuck. He’s the one who ‘provided’ misinformation, if in fact he did, and he is the one you should be addressing – through a letter to the editor, naming him as the culprit… and as for working for the farmers of western Canada … I’m from Ontario and I know exactly who you’re working for, not having been brought up on the fairy tale.