University of Mississippi eGrove Touche Ross Publications Deloitte Collection 1981 Canadian grain: farm exports are key to economy J. W. Madill Follow this and additional works at: https://egrove.olemiss.edu/dl_tr Part of the Accounting Commons, and the Taxation Commons Recommended Citation Tempo, Vol. 27, no. 1 (1981), p. 33-37 This Article is brought to you for free and open access by the Deloitte Collection at eGrove. It has been accepted for inclusion in Touche Ross Publications by an authorized administrator of eGrove. For more information, please contact [email protected]. farm exports are key to economy by J.W. MADILL/General Manager Alberta Wheat Pool s Canada's grain industry enters tious by any of the other major grain producing nations, which include the A U.S.S.R., China, and India, as well as its fourth quarter century of the U.S. But for Canada, grain is i operation, it has three primary basic; Canada is more dependent on objectives: the export of grain than is any other • To increase its total grain exports nation-it's the fifth largest grain pro- to 30 million metric tons annually by ducer, but the second largest 1985. exporter. Gaining a firmer hold on its • To ensure its position in the export position, behind that of the world grain marketplace by selling U.S., is seen by Canada not only as only a quality product. possible but also essential to its eco- • To balance the use of grain so nomic well being-especially in the that its domestic users flourish at the west and in Ontario, where the same time as its all-essential export nation's grain production is centered. market is being supplied. The economic activity generated Such objectives probably would be viewed as being impossibly ambi- 33 CANADIAN GRAIN by the Canadian grain industry Has grain that is traded in the world. except for 1978-1979, Canada has been calculated at roughly two-and- Based on the pattern of worldwide been maintaining 10 to 11 percent of a-half times the value of actual grain grain consumption during the past the world trade in wheat and other safes, which are estimated to be decade, projections for 1985—the tar- coarse grains. The U.S., which is the between $3 billion and S4 billion for get date set by Canada for fulfilling major grain exporting nation, Canadian Wheat Board sales alone, its number one objective—suggest accounts for approximately 50 to 60 and probably double that if all grain that the world demand for wheat and percent of the world's total. sales are included. Thus, these three coarse grain will be about 219 million Though past statistics would sug- objectives are endorsed by the metric tons, If Canada maintains its gest that Canada will continue to 150,000 grain producers in Western current market share of 10.5 percent, increase the production and exporta- Canada, the Canadian government, however, its level of grain exports at tion of grain, does it have the poten- grain handlers, transporters, proc- that time would be only about 23 tial to increase such exports by as essors, and others, despite some fric- million metric tons. In order to reach much as 30 million metric tons? Sev- tion and much disagreement about its target of 30 million metric tons by eral studies have been completed the procedures for their imple- 1985, therefore, Canada will have to which take into account the mentation. increase its market share by increas- increased acreage, increased yields, If Canada can meet its first objec- ing grain exports 38 percent. new varieties, summerfallow land, tive of increasing its grain produc- and alternate crops that would be tion, and thus its exports, can it be Has Canada the Potential? required in order to achieve that assured that the worldwide demand Canada has attained the position of level. If one uses historical data to for such production will continue? being a major world grain producer project the 1985 production, esti- Past statistics and (Future projections and exporter because of its geogra- mates come up short of an export- suggest that it can. phy, the unique structure of its grain able surplus of 30 million metric tons. During the seven years ending in industry, and the skill and persever- Thus, to meet 1985 objectives, ade- 1980, the worldwide production of ance of its farmers. quate incentives must be offered. grain (which includes wheat, rice, Most of Canada's grain is produced Incentives that would stimulate corn, barley, rye, oats, sorghum, and in a fairly narrow belt of land stretch- grain production would appear to be millet) increased at an average ing along the southern border of its in the areas of price, marketing, and annual rate of 1.73 percent, while the western provinces. Covering 197,000 transportation, if incentives were worldwide consumption increased by square miles, it is an area blessed present in those areas, extra produc- 2.25 percent. This difference was due, with rich soil and with a climate that tion would come from: new land and in part, to a world population produces a high quality grain Can- summerfallow land being put into increase of 1.95 percent; and the ada's hard red spring wheat, for production; land being turned from demand was satisfied by carryover example, has long been the standard the production of alternate crops to stocks from crop years in which the for bread wheats, and, recently, new the production of grain; new varieties production of grain outweighed the wheat grades with greater protein of grain; and further use of fertilizers, demand. content have been introduced. chemicals, and irrigation. An even greater difference is evi- Though Canada produces 40 mil- dent between the rate of increase in lion metric tons of grain annually-or The Industry's Structure grain production and that of world about 12 percent of U.S. production- Also a factor in Canada's achieving its trade, the latter of which has grown it has been able to compete with the objectives is the structure of its grain at an average annual rate of 5.6 per- U.S. in world markets. In 1979-1980, industry, which combines features of cent since the 1973-1974 crop year. for example, it exported a record 21.7 both a central agency system and The primary reason for this disparity million metric tons. (Such exports commercial enterprise. The structure is that three of the five major grain account for 70 to 80 percent of its is that of a complex mixture of producing nations—the U.S.S.R.. wheat production, as compared to 50 players, each of whom is involved in China, and India—consume more percent for the U.S.) Total exports the movement of products from a grain than they produce. They, have been increasing at-an average widely scattered geographic area, together with Europe, import approx- annual rate of 7.2 percent per year through a complex rail network, to a imately 60 percent of all the since the 1973-1974 crop year; and, limited number of outlets. That 34 aspect alone demands a high level of is a guaranteed floor price estab- tives, private companies, or the fed- cooperation and coordination. But lished by the government However, eral government. These terminals are when the customer, weather, and if funds remain at the end of the crop responsible for receiving, cleaning, government regulatory bodies are year after the grain is sold, and after storing, and weighing grain, and then added, cooperation and coordination the board pays its expenses, the loading it aboard vessels. become critical. farmer will receive a final payment. Farmer-owned cooperatives have By far, the greatest impetus for the Other governmental departments played a major role in" the Canadian development of a grain industry in also are involved in grain marketing, grain industry ever since the railways Canada has come from the federal the Department of Industry, Trade, first crossed the western prairies. The government, and it continues to play and Commerce works primarily on four major farmer-owned coopera- a vital role. At the turn of the century, export development through trade tives-the Alberta Wheat Pool, the the government provided the funds offices located around the world. The Saskatchewan Wheat Pool, Manitoba for rail construction, built terminal Grain Marketing Office administers a Pool Elevators, and United Grain elevators, and eventually became fund to assist private firms with mar- Growers—own about 77 percent of involved in regulating the industry, in ket development for grains and oil- the primary elevators and handle the fall of 1979, it appointed a grain seeds. And the Canadian Interna- about 75 percent of the total grain transport coordinator, who was given tional Grains Institute, funded by the entering the elevator system. The the authority to make whatever Department of Trade, Industry, and unique role of cooperatives is to pro- adjustments that might be necessary Commerce, tries to develop and vide service to the farmers who are in Canada's grain system to accom- maintain new markets. the owners of the organizations. Any plish the goal of a 50 percent increase Most of the Canadian grain that is earnings by the organizations are in exports by 1985. not traded in the export market by returned in the form of patronage The federal agency created to regu- the Canadian Wheat Board is sold on cash dividends or increased reserves late the Canadian grain industry is the domestic market through the to the farmers who delivered grain. the Canadian Grain Commission, a Winnipeg Commodity Exchange, a Responsible for the movement of branch of the Department of Agricul- nonprofit organization which grain to a port terminal or to a ture.