In Depth

46(d) and 14(b) is NOT the Buyback

Whenever the term “buyback” is mentioned in a room full of farmers, there is an audible groan. Everyone is fed up with it.  Most farmers relate very different buyback notions and experiences.  It’s confusing and frustrating, because we can’t make sense of a process where we are forced to do something that is not legally required.  Don’t go searching because the word buyback is not once mentioned in the CWB Act.   Farmers and academics alike, have come to realize that the CWB must have created the buyback scheme in some dark backroom because buy-backs are certainly not a creation of Parliament.

We have all learned the hard way that the devil is in the details. Every time a buyback occurs, dollars change hands, and producers need to know how these transactions affect them.  We need to examine why we are being told by the CWB that we have to do something the law does not require us to. Blind obedience has not always been in our best interest.

Buybacks...groan

For those Grainews readers who don’t know what a buyback is all about, the buyback is a CWB scheme that forces a producer to sell his wheat or barley to the CWB, and in doing so, he participates in the "pooling process".  He then buys the very same grain back from the CWB in order to receive the export or interprovincial licence that is required by the Act.  Only then can he export to his buyer who was interested in his grain in the first place.  The CWB recently changed  the name for “the buyback” to Producer Direct Sales (PDS), but the “PDS” means exactly the same thing for the farmer as the buyback did...sell...pool....re-buy. The bottom line is this ..... export licenses are a must, but only farmers in the West must jump through this buyback hoop in order to get the license.

Who owns the grain?

We all know about leasing tractors.  The company legally owns the tractor, but the farmer has  possession.   Ownership affects how we do business and it is an important point in law.  The buyback too,  is about ownership and there are two legal transfers of ownership in a buyback transaction.  At the same time you trace the ownership threads below, you might be interested to note what a rigamarole Benny goes through trying to export his wheat to his buyer in Georgia.

1. Producer Benny applies for an export license for wheat and is told by the CWB he must do a buyback,  (which means selling to the CWB), before they will issue him a license.
    
2. Producer Benny owns 1000 bushels wheat and has no other option than to sell it to CWB for the initial price.   He loses ownership, but retains possession of the wheat.
    
3. CWB now legally owns 1000 bu. of wheat, without possession. The  CWB can sell this wheat for whatever price they consider reasonable.  CWB may or may not choose to sell the 1000 bu. to Grain Buyer Benny.  If they chose to sell, the CWB transfers ownership to Grain Buyer Benny and they grant an export license.
    
4. The CWB pools the money realized from the selling 1000 bu. and sends it to Producer Benny  in interim and final payments throughout the course of the crop year.
    
5. Grain Buyer Benny buys the 1000 bushels, still in his possession, at whatever price the CWB considers reasonable, and gains ownership.
    
6. Farmer Benny finally markets 1000 bushels to Georgia, accompanied by the export license.
    
7. In the case of selling to an agent of the Board, for example an elevator,  possession transfers from the producer to the grain company, but legal ownership transfers to the CWB.

Often, a Prairie farmer complains and says he doesn’t know why he is obligated to do the buyback instead of simply being issued  the license.  And sometimes he gets angry and demands “Where does it say in the CWB Act that I have to do the buyback?  Show me the law ”.  The CWB soothingly refers to the Act and tells the farmer that the buyback is clearly described in 46(d) and 14 (b).  They tell farmers that these sections are contained in Part IV of the Act  and that this process is indeed, the law of the land.  The Board insists the buyback is a legal requirement, but considering that Section IV applies to every province across Canada, there is something, er, fishy.  Why is it that Quebec does not do buybacks?

War and Wheat

The next question became, “Where in the world did the buyback originate?”, because maybe that could help solve the buyback questions.  And that was enlightening research!

During wartime, Governments take what they want. Grain, steel, lumber.  And grain.   The War Measures Act gave the Government every right to walk in and take grain whenever they chose. During war, the thought of a  farmer getting his grain confiscated was an inconsequential  hardship compared to the families who lost their fathers and sons.  Nevertheless, war legislation was harsh for everyone and the word appropriation was  not to be taken lightly in the War Measures Act:

"3.  The Governor in Council  may do and authorize.........
(f)  Appropriation, control, forfeiture and disposition of property and the use thereof."

Farmers were directly affected.  There was an existing1935 CWB Act but it was quickly revised by the Government during WWII and in 1943,  the CWB too, was given sweeping powers under the War Measures Act.     On October 12, 1943, the CWB was clearly given complete monopoly control over wheat by  Order in Council, No. P.C. 7942.  Rummaging through old Government war records produced these harsh regulations:

1.  In these regulations......
(a)   "Act"  means the Canadian Wheat Board Act, 1935, as amended;
(b) "western wheat" means wheat produced in that area comprised by the provinces of Alberta, Manitoba and Saskatchewan and those parts of the province of British Columbia known as the Peace River District, the Creston-Wyndal area and such other parts of the last named province as the Board may from time to time designate;
(c)  "wheat" means wheat produced in Canada;.......

2.  No person shall, except with the permission of the Board, either for himself or as an agent for or otherwise on behalf of another person
(i) provide, maintain or operate any facilities for the purpose of enabling any person to trade in wheat;
(ii)  buy western wheat  from a producer for resale or for export or for processing or manufacturing purposes;
(iii)   sell western wheat for export. 

3. (1) “The Board may, by order,- .....
(iv)  prohibit the export of wheat or wheat products from Canada either absolutely or except under a licence from the Board issued on such terms and conditions as the Board may prescribe or except in such manner and on such terms and conditions as the Board may in any order prescribe;”

11. (1) “Notwithstanding anything contained in the Act the Board shall
(a)  buy all western wheat offered for sale by producers .....” 

In a court case called Canadian Wheat Board v. Nolan  (1950),  a Supreme Court Judge named   S.C.R. Rand J. described what tough legislation the Government had really passed:

"order-in-council No. P.C. 7942, issued October 12, 1943 brought about a regulation of wheat of the  most drastic sort: except with the permission of the Wheat Board, no person could buy wheat from a producer for resale; the Board could require any person to offer wheat owned by him for sale to any other person on terms prescribed by the Board;"

The War is Over

Peacetime came and the War Measures Act went.  The CWB’s lawyer, Henry B. Monk understood that the appropriation powers granted to the CWB in wartime must also end.   On January 8, 1946,  Solicitor Monk wrote a letter to The Department of Trade and Commerce in Ottawa,  worrying:

"....we have some real doubt if the Dominion Government can, in peace time, grant to the Board the powers it has received and exercised in wartime."

After all, expropriating Canadian farmers’ grain would be unconstitutional in peacetime, but how could they keep their hooks in all that grain?

In a confidential document called, “ Memorandum to the Wheat Committee of the Cabinet from the Canadian Wheat Board,  Re: Questions of Policy for Consideration and Decision, “and dated December 11, 1946, Monk knew the gig was soon up when he relates the Board’s position:

“We are advised that there may well be legal problems in continued control of these grains.”

Flaxseed growers must have been getting antsy because in this same letter, Monk confesses:

“At present, the Board acts as a monopoly handler of flaxseed paying a fixed and final price to producers, basis $3.25 and selling domestically under direction at $2.75.  Export is strictly controlled, being confined to registered seed, linseed oil and paint.  The United States price rose to around $7.25 under decontrol and we have refused many applications from producers to export flaxseed”. 

How could they stop farmers from wanting to get world prices?   Needing world prices. Changes to the War Measures Act would obviously present a cash problem for Parliament.  The Government of Canada had made a legal agreement to sell wheat to a hungry Britain at $1.50 per bushel for four years in a row.  Usually prices rise following a war, and Canada wasn’t exactly rolling in money.  The Government needed to make sure they had a plentiful supply of wheat.  At the low price.  Their eyes rolled towards the CWB.

Scheming on the Hill

On December 14, 1946, an interesting document called MEMORANDUM TO WHEAT COMMITTEE OF CABINET RE: LEGISLATION FOR CONTINUING PRESENT POWERS OF THE CANADIAN WHEAT BOARD reflects where Ottawa was headed.  Read ‘em and weep.  This is a little like being a “rubberneck” on the old telephone party line, isn’t it?

“In entering into the contract to sell wheat to Britain the Government has embarked on a policy which makes necessary the continued monopolistic control of marketing of wheat, and it can be expected that an attack will be made upon any legislation for the continuation of the present controls.  It would seem, therefore, that the authority upon which a scheme of control is based must be the strongest possible legal grounds, as great confusion will result if for any reason the present scheme is upset before termination of the contract period or before the completion of the period during which the Canadian Wheat Board has been instructed to pool producers’ deliveries; that is until July 31, 1950.”

Parliament, with a majority of Eastern MP’s was inventive, indeed.  On May 14, 1947, they created what we call Part IV of the CWB Act, and this was enacted into what they called ‘An Act to Amend the 1935 Canadian Wheat Board Act’, 11  George VI, Chap. 15.  Part IV applied to every province, and still does today.    Historical papers give us a really good look at what the  Parliament of ‘47 was thinking at that time and what the real reason was for amending the 1935 Act.  This is a quote from the beginning part called the Preamble: 

"Whereas the Government of Canada has entered into an arrangement with the Government of the United Kingdom for the sale and delivery of substantial quantities of wheat to the Government of the United Kingdom annually for a period of four years ......and it is necessary to make provision for the carrying out of the arrangement; and whereas it is expedient to amend The Canadian Wheat Board Act, 1935, for such purpose....... "

The intent here is very clear, and then you start to get a little suspicious about their tinkering.

How 46(d) was Originally Hatched

Legislators not only clearly identified the purpose of amending the ‘35 Act,  but they carefully inserted 28(c) into the spanking-new 1947 Act.  Below, if you read 28(c) closely, it is almost the same as the part that today is named 46(d) in the current CWB Act.  Look carefully.  28 (c) and 46(d) look like two peas in a pod.   This part the CWB today calls the buyback was originally installed  into the1947 CWB Act: 

"28. The Governor in Council may make regulations....... 
(c) ......  to prescribe the terms and conditions on which such licenses  may be granted, including a requirement for the recovery from the applicant by the Board or any other person specified by the regulation, of a sum which, in the opinion of the Board, represents the pecuniary benefit enuring to the applicant pursuant to the granting of a license, arising solely by reason of the prohibition of imports or  exports of wheat and wheat products without a licence and then existing differences between prices of wheat and wheat products inside and outside Canada;"

46. The Governor in Council may make regulations ...... 
(d)...to prescribe the terms and conditions on which licenses described in paragraph (c) may be granted, including a requirement for the recovery from the applicant by the Corporation or any other person specified by the regulation, of a sum that, in the opinion of the Corporation, represents the pecuniary benefit enuring to the applicant pursuant to the granting of a licence, arising solely by reason of the prohibition of  exports of wheat and wheat products without a licence and then existing differences between prices of wheat and wheat products inside and outside Canada;

How can we figure out what 28(c) means?  Officially, what was the price inside Canada?   This section applied to every Ontario farmer, every Manitoba farmer; indeed, every farmer across Canada, and undoubtedly, they probably all wanted to know what it really meant. Read on.

A Tariff named 28(c)

It’s always useful to find out where people are coming from.  Then you understand what they are doing.  There is a document called  MEMORANDUM FOR FILE, February 12, 1947, 150042, re: CWB Act- Part IV- sec. 28, and it does both.   It’s a musty Government document that describes what was going on behind closed doors in Ottawa.

In it, MP’s in 1947 discuss why they created a section called 28(c), which today is called 46(d).  As they mull on paper, it becomes obvious they’ve hatched a scheme.  They anticipate price hikes, both domestically, and around the world. Farmers can smell high prices.  Canada  needs a tariff so that producers don’t sidestep the Wheat Board.  They don’t want farmers attracted to a bull market, (the same as those flax farmers pounding on their oak chamber doors were doing), especially when it’s within the Government’s reach to buy $1.50 wheat  A tariff was the answer, but how could they sell the idea of a tax?  Worse, what legitimate reason could they give to farmers for targeting only them with a tariff?  They had to invent a skiff of reasoning to provide an excuse for imposing the tariff, and they did it neatly by making sure any farmer who wanted a better price would appear greedy. Farmers hate being called greedy.  From then on in, it was accepted that any  farmer wanting to get the world price would have to pay the tariff so he didn’t get an “unjustifiable benefit.” Look how they discuss it:

"....it must be recognized that there will result differences in price between internal and external markets, and possibly between provincial markets.  This state of facts will come into existence.  It must be recognized and section 28(c) merely provides a device exactly corresponding to the operation of the protective tariff, whereby the interprovincial and export marketing control of the Board is not defeated and unjustifiable benefits to individuals are avoided." 

Farmers swallowed the bait.  From then on, for a lot of farmers, it didn’t matter how little returns a Western farmer got, as long as nobody else got more, they were satisfied.

“Price Inside Canada”

There was one final detail the MP’s needed to tend to in order to access all the available grain.  They needed a ‘set price’.  On  July 31, 1947,  the Government of Canada set the price of wheat  "inside Canada" by Regulation P.C. 3038,

"Domestic Wheat"
"The Board shall sell wheat to millers, processors, manufacturers, dealers and others for  domestic requirements in Canada other than the production of alcohol at and for the price of one dollar and fifty five cents per bushel for wheat of the grade of Number One Manitoba Northern basis in store Fort William/Port Arthur or Vancouver........"

Thus if they tried to export, the farmers had to pay a tariff based on the difference between the price inside Canada set at  $1.55 and the rising world price.  If wheat was $3.00 in the USA, every bushel netted the Government $1.45 in tariff,  all dumped into Government coffers.  This hefty tax at the border stopped farmers dead in their tracks from exporting.

The Honourable Stuart Garson was the Premier of Manitoba during this tumultuous time.  He did his best to try and work in the interest of farmers.  In a letter he wrote to Mr. C. D. Howe, P.C., Minister of Trade and Commerce on the 16 March, 1948, he writes of his concerns about the Federal Government’s direction.:

“The effect of these provisions in practice was that the Wheat Board was changed from being an agency of the wheat producers charged with responsibility for getting the best possible price, to an agency of the Government, getting a price that would be fixed by the Government, that is a political price, using that phrase in its best sense”

He saw what was coming:

The holding down of the Canadian cost of living and the embargo upon the export of farm products to the United States are examples of policies which are intelligible and perhaps wise.  But they are also national policies, the cost of which should be paid, in our opinion, by the whole body of the Canadian people and not by the Canadian farmers only.

He asks good questions:

At this point may we ask the question, “What other products of Canada, either primary or secondary, is the Government going to fix the price of and leave the burden of carrying the difference between the Government price and the market price upon the producers of those products?”  If this is a good policy for wheat and pork and beef and poultry products, and now oats and barley, why is it not a good policy for copper, newsprint, fish, tractors, and farm implements?

If you ever meet the Honourable Stuart Garson’s family, shake their hands.

Hoodwinking the West

With a sigh of relief, Canada didn’t have to worry anymore even if the world price of wheat went sky high. They were now guaranteed they could purchase wheat supplies at a price they themselves could set.   And the Government didn’t have to worry about raising taxes if the price of wheat went up, especially during an election year,   Nothing nastier than taxing angry voters after a war.  When the dust finally settled, our Legislators had very neatly and quietly downloaded the cost of supporting Great Britain on one single segment of the population..... Canadian farmers.

So, Britain got fed.  The feeding industry in Eastern Canada flourished under the legislation and Prairie grain could not escape.  Price discovery for wheat was like dealing with a wizard because the price of wheat and barley was set by MP’s, and the East sported a loyal assortment of officials looking after their own interests.  Grain trains leaving the Colony bound for Eastern  feedlots, were subsidized by the Crow.  Poultry and hogs were fattened and sold in the growing cities that fed them.

Eastern Feeder’s neat schemes, Fed his cow
Western grain, Crowing freight, feeding sow,
Bushel tariff in place
Plus a “set price” disgrace,
Adding value Down East, that is Howe.

As jobs, industries and dollars attracted themselves to the positive end of the magnet just east of the Manitoba border, the West withered, and grew more negative.  Prairie farmers learned the fine art of begging with their ballots, for a few cents more per bushel during the next round of Government price-setting, coincidentally scheduled around election time.  And of course there were farmers in the West who stood smiling, caps in hand, with their arms outstretched, honored with the privilege of being eternal suppliers of raw product priced by trusted politicians.

The tariff 28(c) requirements remained in place, with the ‘price inside Canada’ set intermittently by the Government, (as for example when Canada had a two-price system), and today, those same tariff requirements remain wedged in 46(d).   But the world has changed.  Today, trade agreements require there cannot be a  difference between the price inside and outside of Canada and there cannot be a government set price inside Canada.

46 (d)...  once called 28 (c)... is still in effect today in every province  in Canada because 46(d) remains in the licensing Part IV of the Act.  This article has examined the origins of the 46 (d) and has shown that the original intent of Part IV was to function as a tariff rather than a buyback.  For all the naysayers who say ‘that’s all in the past’, the next article will examine the large body of facts that consistently confirm that the CWB is incorrectly telling farmers that the buybacks are prescribed by Parliament in Part IV. 

Notions and facts should not marry.  At one time, everyone had the notion that the world was flat; and only extremists and dullards would argue that it was not.  Last week, we examined the origins of the CWB's "buyback" requirement which the Board claims is prescribed by 46(d) and 14(b) in the Licensing Part IV of the CWB Act.  We examined the actual Cabinet documents which clearly revealed that the Government's original intent of Part IV was to function as a tariff as opposed to a buyback.  Just as years ago,  the round-earth theory gained widespread acceptance as evidence mounted,  this week's facts will hopefully confirm for Grainews readers, that the CWB's claims, insisting that the buyback criteria is written in legislation in Part IV of the CWB Act, are simply not valid, and therefore, 46(d) and 14(d) could not reasonably be the "buyback".

Who Creates Facts?

The professionals and consultants that farmers both depend upon and pay, for leadership and advice, rarely question the Board's explanations, and often, they defer to the CWB 's own in-house 'experts' when establishing a basic working knowledge of Board 'facts'.  For example, the legal robes all nodded their heads in agreement in the1999 case The Queen v. Charles et al.   The judgment recorded agreed-upon facts,   "......the 'buy-back' as provided for in section 46 of the Canadian Wheat Board Act  and in section 14(b) of the Canadian Wheat Board Act Regulations......", that are neither logical nor in law.  Since only Prairie producers are directly effected by the rulings,  it is not surprising if they study the facts closely.

Benny Unravels a Buyback

Prairie Producer Benny typed  http://laws.justice.gc.ca/en/C-24/index.html into his computer,  read 46(d) in the CWB Act, and scratched his head. He wanted to first look at the Act itself to see what Parliament actually says, because sometimes bureaucrats exercising the Act get a little 'inventive' with the regulations they create even though they are supposed to reflect the Act.  The buyback had cost him cold cash and Benny wanted to find out if the Wheat Board was augering his money into some black hole, and the Act seemed a good place to start.  First of all, he read 46(d) as if it was a buyback because that's what the Wheat Board told him it was,  but he just couldn't make head 'nor tail of it, especially since 46(d) applied to all Canadians, and Quebec sure as hell didn't do the buyback.  Nothing made sense, and Benny was discouraged, but he decided he'd stick with it a little longer because somebody's scheming was somehow costing him a lot of money. This is what Bennie had to figure out:

46. The Governor in Council may make regulations
(d)   to prescribe the terms and conditions on which licenses described in paragraph (c) may be granted, including a requirement for the recovery from the applicant by the Corporation or any other person specified by the regulation, of a sum that, in the opinion of the Corporation, represents the pecuniary benefit enuring to the applicant pursuant to the granting of a licence,  arising solely by reason of the prohibition of  exports of wheat and wheat products without a licence and then existing differences between prices of wheat and wheat products inside and outside Canada;

Then Bennie realized,  "Hey! Canadian prices are set by world prices. There's no difference in the price inside and outside Canada."  Excited, Benny decided to begin looking at 46(d) as if it was a tariff,  partly because he'd heard the good old boys on the Hill had called it a tariff,  but mainly because he hadn't come up with any other ideas.

Producer Bennie figured it out this way--- the Wheat Board can collect a tariff on his wheat, essentially a mitt full of cash ......that amounts to the World  price minus the Canadian price.

Benny knew the domestic price is the same as the world price, so it was a no-brainer to calculate the tariff for all Canadian exporters at $0.00.  So how come the Wheat Board had made Benny pay out the difference between the initial price and the market price to get his license?  Hmmm.  Benny knew the initial price was just a percentage of an estimated average price, over a period of time, in only part of Canada, and called the  "sum certain" in another part of the Act, so he hunted for the phrase 'initial price' in 46(d).   Not there, so he looked up Regulation14(b),  but it wasn't there either.  That was puzzling.  It was clear that Quebec, the feed mills and the seed growers, all followed the exact same Act he did, and the Wheat Board granted them the export license, and the tariff  was definitely $0.00 for them, so why was he the guy forking out the cash?  Benny noted that all of them kept ownership of their grain, but he recalled he was not granted an export license by the Board until he gave up  ownership of his grain to the Board.  Benny suddenly realized that the Board always automatically issued licenses to all these other groups but the Board had denied his license application until he gave up ownership.  Issued in the East and denied in the West.  How could they do that if the buyback was 46(d) and 14(b) and covered everyone?

Bingo!  46(d) and 14(b) was not the buyback!   Benny realized he'd been hoodwinked.  He realized the Wheat Board could be standing on some really shaky ground because they were withholding export licenses, denying them, in fact,  from only one group of producers in only one part of the country.  But how could Benny back up what he'd figured out, and who in the devil would believe him?

Original Purpose

You will recall  . . .  how 46(d) of the statute and 14(b) from the regulation,  was originally created as a tariff in the 1947 CWB Act.  Although some readers will say, "Get in today's world!",  it is not possible for the CWB to dismiss these origins simply because they now want them to mean something else, unless of course, absolutely nobody protests or notices.

Firmly-established legal precedents prevent the Wheat Board from legally deleting the 'original-purpose ' icon.  The tariff legislatively stays in place.  Whether it's First Nations land claims or it's the two Supreme Court cases listed below,  some very clear boundaries have been set regarding changing purpose in mid-stream:  R. v. Zundel, [1992] 2 S.C.R. 731 reads,

"The court must look to the intention of Parliament when the section was enacted or amended.  It cannot assign objectives, nor invent new ones according to the perceived current utility ....."

and R. v. Big M Drug Mart, [1985] 1 S.C.R. 295 states:

"Furthermore, the theory of a shifting purpose stands in stark contrast to fundamental  notions developed in our law concerning the nature of 'Parliamentary intention'.  Purpose is a function of the intent of those who drafted and enacted the legislation at the time, and not any shifting variable."

These Supreme Court precedents clearly show that the '47 scheme of setting up a tariff which is now named 46(d) and 14(b), cannot be re-invented as a "buyback".    Any tinkering or revisions to the CWB Act through the years has never changed Parliament's original 46(d)-14(b) formula for triggering the exporting tariff .  Nor did Parliament substitute it with the {difference between the initial price and  the market price} during the last 'Changing of the Act'.   46(d)-14 (b) cannot be the buyback .  If the buy-backs were intended only for Designated Area farmers, the legislation should be in Part III which is the Designated Area Pooling section of the CWB Act and not Part IV which is the Licensing part of the CWB Act, applying to all of Canada.

Buybacks for Interprovincial Sales

[Earlier]

"14.1   The Board may grant a licence for the transportation from one province to  another, or for the sale or delivery anywhere in Canada of wheat, wheat products, barley  or barley products, but no fee shall be charged for such a licence.”

We have a logic problem here.  The Wheat Board insists section 46(d) and regulation 14(b) describes the buy-back, which requires a fee (and the Board claims the fee is the difference between the initial price and the world price) for Benny's load to Georgia. Simultaneously, Interprovincial Regulations 14.1 states no fee shall be charged for Benny's load to Toronto. How can “a fee must be paid” and “no fee shall be charged” both mean the buy-back?  Which is it?

How can the Wheat Board make Producer Benny do the export buy-back via 46(d)-14(b), and in the same breath insist he also has to do the buy-back for interprovincial sales in 14.1, where fees are forbidden?  This is tough figuring and Benny swore.

The answer is this: 46(d)and14(b) simply do not describe the buyback or Producer Direct Sales (PDS) or whatever they might call it next year.    It's a dilemma the CWB obviously needs to bury, and the Wheat Board's Licensing Department expert witness, Jim Thompson, under oath, dug  for an answer during the 1999 trial The Queen v. Charles et al.    This is quoted directly from the transcripts and the Witness is Jim Thompson and The Court is Judge Henning.:

The Court:   ".... so therefore, by definition, virtually the buyback price only can apply to grain going  outside of Canada."
Witness:             "That's right,   yes."

"That's right,   yes"?  Not in Benny's world!  Prairie producers are forced to do the buyback on grain that sells province to province, used for food purposes, but the lawyers and the judge did not question Thompson 's reply, nor did any of them even seem to grasp the consequences that could stem from it, especially against Prairie producers.

How do you Do a Buyback on Imported Grain or Flour?

Before the World Trade Organization came into effect in 1995, wheat imports in the Act, faced the same tariff requirements as exports. Therefore, the buyback that the Board described as the difference between the initial price and the market price, would have applied to wheat import as well as exports. Let's apply what the CWB tells us, and have a good chuckle at what nonsense occurs when we substitute "imports" for exports:

CWB Act:  section 46.  "The Governor in Council may make regulations
(c) to provide for the granting of licences for the ....import into Canada .... of wheat or  wheat products, which export, import sale or purchase is otherwise prohibited under this Part.
(d)  to prescribe the terms and conditions upon which licences described in paragraph (c) may be granted, including a requirement for the recovery from the applicant by the Board  or any other person specified by the regulation, of a sum that, in the opinion of the Board  represents the pecuniary benefit enuring to the applicant pursuant to the granting of a licence, arising solely by reason of the prohibition of imports or exports of wheat and wheat products without a licence and then existing differences between prices of wheat and wheat products inside and outside Canada."

Section 46 applies to all Canadians and is in the Licensing Part of the Act.  If the word 'import' is substituted, as the legislation allows, you really have to shake your head.   The CWB tells producers that 46(d) is the buyback, so in this case would an importer in Newfoundland pay the difference between the initial price and the world price?  What is the initial price in Newfoundland?  Would the importer sell his load of imported wheat to the CWB and then buy it back again?  Would it be pooled?   Ask the Board how an importer would do a buyback on flour he imported!  Such absurdities flag a lack of congruency and the reader must conclude that 46(d) and 14 (b) are not the buyback.

NO exceptions?.....yah right

On May 20, 1999 the CWB sent the following letter to Producer Rod in the Designated Area:

" ... the applicant for a licence must pay the Board the difference between the market price and the current initial price.  The legislation allows no exceptions."

No exceptions?  Let's examine "no exceptions".  We know there are two parts to the Canadian Wheat Board Act:

Licensing Part....  or all of Canada.....Part IV
Marketing Part.....for only the Prairie provinces.....Part III

Section 14 is in the Licensing Part IV of the Act, and applies to all of Canada.  It then follows that if the Board asks for,  "the difference between the market price and the current initial price, it should be a requirement for all exporters.  And the Board is crystal clear with Producer Rod,  "The legislation allows no exceptions" .  If that is so, then how is it the CWB has already made the exceptions that they say cannot be made?  With the Wheat Board's blessing, the following five groups receive export licenses at no cost, and all of them bypass pooling because none pay the “difference between the market price and the current initial price”:

1. All wheat or barley grown outside the designated area (DA) Ontario, Quebec

2. Pedigreed seed wheat and barley grown in the DA

3. The niche market wheat varieties, spelt, kamut and einkorn, grown in the DA

4. Processed wheat and barley, grown in the DA and for feed purposes, under the Export Manufactured Feed Agreement.

5. When the Creston-Wynndel region was still included in the Designated Area, all wheat and  barley grown in that region were granted licences.

So why did the Wheat Board tell Producer Rod that  "The legislation allows no exceptions" when we can obviously see the 'Group of Five' getting export licenses in spite of bypassing pooling?  Either the CWB is not following their legislation as they claim it be or else the CWB is telling whoppers

Profits Under Part IV

The Wheat Board claims that 46(d) and 14(b) in Part IV describe the buy-backs/PDS.  But if this is true, the CWB would be straying from the law when it takes the "profits" from the Licensing's Part IV and puts them into the pooling accounts in Marketing's Part III.  Section 7.(2) of the Act spells it out:

"Profits realized by the Corporation from its operations in wheat under this Act during any crop year, other than its operations under part III, with respect to the disposition of which no provision is made elsewhere in this Act, shall be paid to the Receiver General for the Consolidated Revenue Fund."

We can see that any profits from the Licensing Part IV of the Act must go into the Government's consolidated revenue fund. When you think about Company XYZ importing wheat for his Ontario mill in 1952,  it is logical that any tariff money collected, required by  46(d) and 14(b),  would not be credited to only Western pooling accounts.  So we know that the buybacks are not described by 46(d) and 14(b) in Part IV.

What Does it all Mean?

The CWB claims that the buyback is legislated in Part IV of the Act, and this article has shown that this is not true. 46(d) and 14(b) are not the "buyback". The legislation does not require a buyback   Part IV applies to Prairie producers the same way it applies to the rest of Canada and it is the licensing authority for all wheat and barley grown in Canada.  The East is not folded into a monopoly by the legislation and this is because the Board grants them the licenses that the Act allows. The Act provides the same opportunity for the Board to issue licenses in the West, but instead,  the CWB themselves have chosen to deny licenses to only prairie farmers, leaving them no choice but to "offer" their grain to the Wheat Board.  The basic problem lies with the Board itself. 

Installment Three

In the previous two installments, we determined that 46(d) and 14(b) are not the “buyback” because first of all, they are contained in Part IV of the Canadian Wheat Board Act which must apply equally to all Canadians; and secondly, their origins began as a tariff; and thirdly, because interprovincial licensing stating “no fee shall be charged” openly contradicts the Board’s “buyback” requiring that a fee must be charged; and lastly, because buybacks could not logically apply to imports as well as exports

The conclusion that the “buyback” is not a legislative requirement and that the Board has instead arbitrarily decided to make it a requirement, is an inevitable one. And no matter what new spin the Board comes up with, doing the buyback means selling solely to the Board, and there is simply no relief from the state trader for a producer.   Meanwhile, the Board is not only granting licenses to favored exporters (like seed growers), but in the case of Quebec, for example, they have entirely excused the export license requirement.  Quebec simply doesn’t appear to use or need export licenses.  In contrast, Manitobans are denied export licenses even though Part IV licensing applies equally to both provinces;  Manitoba producers comply while Quebec producers don’t give the Board the time of day.  This is how the Canadian Wheat Board keeps evolving.

This third installment begins by taking a look at a group of privileged companies who get export licenses, and ends by looking at who pays for the losses from Part IV of the CWB Act.

The Export Manufactured Feed Agreement (EMFA)

Not many producers are familiar with the Export Manufactured Feed Agreement, in fact, few of the CWB Directors knew anything about it until a few years ago when it was leaked out, and currently, staff at the CWB still seem to keep it under wraps.  On March 26, 2002, an Alberta producer reportedly called the Board’s 1-800 number and requested  information regarding the EMFA, but after staff had ‘checked’,  the producer was informed there was no such thing.  The inception of the EMFA was never mentioned in Grain Matters and considering it facilitates licensing permits for hundreds of millions of dollars worth of exported feed, it’s a wonder the Board didn’t announce the project with fanfare.   There are still no press releases issued about it in the CWB’s $2 M communication budget,  neither is there a scrap of an EMFA form available on the CWB's website,  nor links to anything that would explain how it functions, but the EMFA Department is definitely there, functioning quietly behind Wheat Board doors.
 
How does the EMFA work?  There is a copy of the agreement online at  www.prairiecentre.org   if you want to go through it.   Basically, large feed mills throughout Canada  enter into contractual deals with the Canadian Wheat Board that allows them to:
 
 a)  cash purchase grain directly from producers on the farms
 b)  obtain an EMFA license at no cost or fee
 c)   bypass all the pooling and
 d)  export directly to their buyer in the USA.

The CWB set up the contract to read like this, “The CWB will grant the company export licenses to allow exports to the United States of America....”, so it’s a sweet, done-deal that the corporations can count on, and that Prairie producers can only dream about; after all, Western producers, are denied export licenses In turn, the large feed mills must guarantee that each shipment containing no more than 75% wheat/and/or/barley, with a minimum 25% mixture of screenings, oats, flax and so on, be combined/processed into feed.   Each load of feed must be probed and stored and recorded, and the Wheat Board  reserves the option for CWB trained inspectors to monitor the feed being exported.  The CWB sports an EMFA Department in Winnipeg, and the staff issue export licenses by way of ‘Agreements’ to the feed mills on a regular basis.  It seems each Agreement is renewed every year or two, subject to Board review.

Most readers will agree that grain being exported as a value-added product adds to the economy, and it enhances the bottom line for many of the large companies who manufacture and export into a bullish feed market.  All the while the corporations are able to access American markets even though bypassing Part III’s buyback and pooling,  the Prairie producer is inconsistently denied an export license, and is told to do the buyback, which of course means selling to the Board. The tête-à-tête with the feed mills resulted in the Board not only deserting the ‘pooling pillar’ concept, but divorcing themselves from actively marketing all this feed wheat and  barley.  The old expression “what is good for the goose is good for the gander” doesn’t seem to be applied here and instead, the Board has focused upon denying export licenses to only Prairie farmers.   From a fairness point of view as well as a license-denial issue, this inequity has not gone unnoticed and it undoubtedly reflects the steady one-way trend leading away from the Board, indicating that Board support continues to erode.

Who Pays for EMFA Losses Under Part IV?

Millions of bushels of wheat and barley have passed through the Feed Agreement and the Board’s decision to not market producer grain directly into a lucrative export feed market, but rather to allow the big corporations to service these markets, prompts the next logical question that Producer Benny would ask,  "Who is  legally responsible for paying for the licensing, and the inspections and the filing and the data processing and the reviewing and the contract renewing that becomes a loss under Part IV of the Act?

It’s a legitimate question, and one that Parliament answers clearly:
 
Losses
                                    (3) Losses sustained by the Corporation

                                    (a) from its operations under Part III in relation to any
                                    pool period fixed thereunder, during that pool period,
                                    or

                                    (b) from its other operations under this Act during any
                                    crop year,

                                 for which no provision is made in any other Part, shall be
                                 paid out of moneys provided by Parliament.

                                 R.S., 1985, c. C-24, s. 7; 1998, c. 17, s. 28(E) .

As you will recall from reading about profits in the last installment, there is no longer a difference between the world price and the domestic price,  there is no profit in Part IV;  hence, no money is sent to the Revenue Consolidated Fund.    But the losses in Part IV are another matter.  Agents of the Board like Louis Dreyfuss, Con-Agra,  Agri-Core, SWP, and Cargill just to name a few, all buy grain from the Board which they in turn market and export, and they provide a necessary service for producers. There is a regulatory cost incurred by them as well as by the feed mills. Seed growers export and a license is provided to them, but  the seed growers say it doesn’t cost them anything.  Someone picks up the licensing tab.

Saskatchewan Association of Rural Municipalities (SARM) reflected those same concerns in a letter to the Auditor General on November 5, 2001,  to ask whether or not the legislation allows the CWB to take money from farmers' pooling accounts to pay for the losses under Part IV of the Act.  The Auditor General’s office has repeatedly indicated that they only examined areas that the CWB asked them to examine, and in all likelihood, the CWB didn’t instruct the Auditor General to examine, “Who pays for losses in Part IV?”. After all, telling farmers their accounts are being raided to cover the Government’s licensing requirements opens a real can of worms.

It’s a question the Wheat Board likes to dismiss by responding that they receive Federal interest money that more than covers the losses, or sometimes they will reply that the loss from Part IV is insignificant, so small an amount, it is of no concern, although Parliament evidently thought it important enough to address.   But of greater importance is the unanswered question. “Why is the Board itself not working within the boundaries that Parliament has declared?   If the amount of the Losses is so negligible, why would the Board keep it from farmers, and be willing to ignore their legislation over pennies?  And  mistrust spirals as producers begin to ask,  “What else is the Board hiding from farmers?”.

Dipping Into The Pooling Accounts

Parliament says that the Licensing part of the CWB Act,  in Part IV,  is supposed to be paid for by the Federal Government,  but it is not.  The Board doesn’t plan to top up the pooling accounts with the potential profits from feed grains since they have chosen to bypass pooling;  but ironically, the CWB dips into farmers' pooling accounts to pay for Government licensing requirements.

 On 7 June, 2001, at the Standing Committee of Agriculture in Ottawa,  Howard Hillstom, MP, asked the Chairman of the Canadian Wheat Board, Ken Ritter  this question: 

Mr. Howard Hilstrom: "...........who is paying the fees for the manufactured feed, the seed growers for all these export permits? Who is paying those fees?  Is it not the pooling system because that's the only money you guys get? I'll let you answer those questions.

Mr. Howard Hilstrom: Who pays it?

Mr. Ken Ritter: Pardon?

Mr. Howard Hilstrom: Who pays those fees?

Mr. Ken Ritter: Well, it comes out of the general pooling account........
 
Producer Benny moaned.
 
How the CWB Treats Western Producers

1. It seems the CWB has decided to no longer require a Quebec producer to obtain an export license before shipping into the USA, but the CWB continues to refuse to grant export licenses to an Alberta farmers unless a buyback is done, and this is a licensing denial based on where you live, and this is not mandated by the Act.  The Board issues licenses to other ‘advantaged groups’ upon demand  Common sense tells us this is not only un-Canadian, it is unconstitutional.
     
2. Not only is Western Producer Benny denied an export license, but he pays for the licensing of those kamut growers and feed mills and seed growers who were issued the licenses!  Farmers need to ask the CWB  this question: “Does the CWB Act allow the Board to take money from producers’ pooling accounts in Part III to pay for licensing costs in Part IV?  Yes or No?”. There is a principal involved here, endorsed by Parliament,  that cannot be discarded.
    

Plainly, Producer Benny pays bills that Parliament says he is not legally responsible for paying, and he reluctantly does a buyback  that is not legally required in law,  Unless producers like Benny make a serious effort to ward off the CWB’s encroaching authority and to critically examine the information provided to them by the Board, the CWB will continue to circumvent the CWB Act, because the CWB bureaucracy and some of the Directors themselves will become bolder than they already are.

This winter, with her slick overhead presentation with supporting pictures, one CWB Marketing staff member casually likened Prairie organic producers to German shepherd dogs. This calculated disrespect by Board staff towards producers, bodes ill for the future of all Western producers because the Wheat Board will likely focus on systematically targeting individual producers and groups of producers in increasingly negative ways... alienating them, humiliating them, intimidating them,  not just based on where they live, but based on who they are and what they say.  Don’t stand by and let it happen.

This article has been prepared by Carol Husband with kind permission to reference the Research Material of D. John Husband

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