Contribution of Marketing Boards

• Marketing Boards are normally established under government legislation and are responsible for providing adequate supplies of food at a price based on the costs of production.
• Marketing Boards are needed to solve problems, which are unique to agriculture. Agriculture is distinctively different from other industries in Canada. Whereas a few large firms dominate other industries, agriculture is characterized by a large number of small independent producers (There were 385,610 farm operators in Canada -1986 census). There are also a lot of consumers who are unorganized and only have their personal resources when dealing in the market. The farmers and the consumers do not deal with each other directly since they do not normally live in proximity to each other. The development of concentrated urban societies means that whole-sellers, food brokers, food processing companies and retail stores had to undertake many of the jobs which were traditionally performed by farmers and consumers. As the farmers gave up more and more of their marketing role, they got less and less of the money which the consumer paid. This is because the marketing process had been split into very specialized sections each with a limited role but providing efficiency and high capacity.
• It has also been found that prices for agricultural products not managed by marketing boards can rise and fall irrationally. There is no other industry in Canada which experiences such price fluctuation and which has so little relation to the cost of production.

An interesting phenomenon associated with agriculture is that the increase in retail prices of agricultural produce has seldom any relation with an increase in farm prices. It has been found that products such as eggs, turkey, milk, wheat, chicken etc. which are sold by marketing boards increases less than many other foods particularly those which are imported.

• Prices for foods purchased by marketing boards have increased much less than prices for other goods and services.
• Most of the increases in food prices occur because of higher input costs and profit margins enjoyed by food processors, whole-sellers and retailers.
• Marketing boards use many methods to encourage efficient, low-cost food production which includes:
• Producer prices are based on the average costs of production. This means that farmers with higher prices are penalized. This encourages low-cost production, which benefits consumers, since lower costs means lower costs of production meaning lower prices for the produce.
• Boards provide producers with information on new methods of production, storing, grading and marketing and encourage innovation which all transforms into lower costs.

• The fact that marketing boards penalize farmers with higher costs of production has meant that Saskatchewan farmers who have been facing a very high cost of production over the last few years (due to rising fuel, fertilizer and machinery costs) find their profit margins squeezed to the limit. The low produce price works to their advantage only if they face lower world market prices and lower input costs. But when they face higher input costs and lower market prices then the fixing of crop prices by marketing agencies like the "Saskatchewan Wheat Board (SWB)" does them little good. The problem is made worse when they face higher input prices and higher (lower) input prices since the prices set by the SWB are lower than what they can charge.
• Some of the critics of Canadian Wheat Board (CWB) have charged that the CWB lacks marketing power to get price premiums for Canadian wheat. CWB has been blamed for increasing the cost of marketing grain and delaying the licensing of new varieties through its influence on the grain regulating system in Canada (Carter, 1993; Carter and Loyns, 1996; Carter and Loyns, 1998). An important report written by Carter and Loyns failed to find any evidence that the farm-gate prices obtained by CWB for Canadian farmers were greater than what US growers got from trade (See Carter and Loyns, (1996). They found that CWB resulted in average 600 million dollars per year in lost revenues and added costs, which were covered by the producers. They charged that the CWB lacks efficient handling systems to respond to the markets and is plagued with inefficiencies in operations resulting in higher cost of production. They found that the CWB "has no real power to influence policies of competing nations." They found that private market driven trade could achieve the so-called single-desk selling benefits like market power and risk management and can at the same time develop market-niche.

• With the SWB going public on the Toronto Stock Exchange in 1995, concerns have been raised that SWB has become more concerned with the value of its shares than playing the role of policy advocate, which includes supporting the CWB (See Schmitz and Furtan, 2000).

Carter, C.A. (1992), "The Participation of China and the Soviet Union in the Global Wheat Market," in Tilman Becker, Richard Grey and Andrew Schmitz (eds.), Improving Agricultural Trade Performance under the GATT, Kiel, Germany: Wissenchaftsverlog, pp.45-59.

Carter, C.A. and R.M.A. Lyons, (1992), "The Economics of Single Desk Selling of Western Canadian Grains," Edmonton: Alberta Agriculture, Food and Rural Development.

Carter, C.A. and R.M.A. Lyons, (1992), "The Federal Government and The Prairie Grain Sector: A Study of Over-Regulation," Monograph Series on Public Policy, Toronto: Center for Public Management, University of Toronto.

Shmitz, A., and Furtan, H. (2000), "The Canadian Wheat Board: Marketing in the New Millennium," Regina: Canadian Plains Research Center.

Shmitz, A., (1996a), "Economic Performance of Canadian Wheat Board: Myth and Reality," Filed in the court case of Archibald et al. v. CWB & HMQ (Federal Court No. T-2473-93), Calgary, August 17.

Shmitz, A., (1996b), "Rebuttal to the Affidavit of Dr.Colin Carter," Filed in the court case of Archibald et al. v. CWB & HMQ (Federal Court No. T-2473-93), Calgary, August 17.