Why is the government in the process of closing a dozen plants? A key part of the answer is the Canadian Wheat Board (CWR) and its subsidiary, the Canadian Wheat Board (CWS). In a nutshell, Canada’s national wheat management system involves an industry of 16 farms with a supply chain that covers approximately half of the world’s wheat. About 40 per cent of Canada’s wheat is sent to China and Europe, while the rest, about 20 per cent, remains at processing plants throughout the country.
According to the World Bank, a large part of the world wheat market currently lies in China and the former Soviet Union. In 2012, the World Bank estimated that about 20-25 per cent of world wheat production comes from China. This number has more recently increased to 29 per cent.
What is the connection between Canada’s wheat management system and the recent closure of two major plants in Saskatchewan? Canada’s wheat management system can be seen as a microcosm of the larger U.S. grain management system, which is centered around commodity trading. Both the CWR and the CWS are located in this country. This means a lot of information is shared among them; information shared in one system will soon be shared in the other.
Canadians and people in the industry understand this connection. In its June 2013 quarterly letter to shareholders, the CWR noted that Canadian wheat markets were about 80 per cent of the world market and that “the Canadian wheat system constitutes one of the most important and sustainable parts of the global food and feed security infrastructure in a rapidly changing marketplace”.
However, according to a 2015 National Research Council report, the overall value of wheat is a lot more than the value of Canada’s wheat management system, as this report found. The CWR reported the value of the Canadian wheat industry was about $70 billion. This number excludes all subsidies, including the price of grain which may be significant, as well as the value of the country’s agricultural sector.
While this report points to the value of the Canadian grain management system as a component in the overall value of the global wheat market, it does include many other costs to Canada’s agricultural industry, some of which may be ignored by market participants. For example, the report states that Canada’s agricultural sector had cost increases of about 27 per cent in the three years to 2013.
While this study does not state what these cost increases are for, it does show that
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