Single Desk Good for Potash - Why Not Grain?

Canadian Wheat Board Alliance

You have to admire politicians who set aside long held beliefs when they are confronted with the reality of how the world works. Reality sets in once they arrive in government and are responsible to more than just their supporters. A good couple of cases in point are former Alberta Conservative Premier Peter Lougheed and Saskatchewan’s Premier Brad Wall. Both were elected on strong free enterprise platforms and both confronted the necessity of regulating a defective commodity market to protect a critical resource for their provinces.

Lougheed had the courage to successfully confront a reluctant foreign owned industry and a hostile Federal government. Time will tell if Premier Wall is made of the same stern stuff.

In the 1970s Harvard educated Peter Lougheed was confronted with a problem in Alberta’s energy sector. There were dozens of small natural gas producers who had drilled themselves into poverty. Natural gas was so cheap that it was usually not worth connecting a pipeline to capture it and so much was being flared that large parts of rural Alberta’s night sky glowed orange. To compound matters, access to the pipeline system was limited and the State of California, Alberta’s biggest customer for natural gas, was playing weak producers off against each other to lower the price further.

Never one to let his campaign slogans get in the way of being realistic, Lougheed promptly regulated the malfunctioning free enterprise system. He instituted a unified border price for natural gas exports and had the Province’s regulator strengthen the quota system for access to the pipeline system. He financed rural gas cooperatives to bring natural gas to farmers and small towns, and for good measure he mandated that certain components of the gas stream had to be used in a local petro-chemical industry. His legacy is a world scale petro-chemical industry, a strong domestic gas market, and significant provincial royalty revenue from natural gas exports.

For grain farmers this sounds and looks a lot like the Canadian Wheat Board and our system of sharing access to the railways and terminals.

Jump to today and the Premier of Saskatchewan, Brad Wall, is following in Lougheed’s footsteps. Like natural gas, potash is a strategic resource owned by the people of the province. In fact it was the Government of Saskatchewan which financed the research and development of the mining techniques that made Saskatchewan potash economic to produce. Potash royalties are critical to government revenues. So critical in fact, the Government of Saskatchewan created its own potash board, called Canpotex, to act as the single desk seller of Saskatchewan potash exports from its three producers.

Now an Australian company wants to buy one of those producers and end single desk selling. Premier Wall, like Premier Lougheed before him, understands how damaging that would be for the provincial economy and is publically acknowledging that ending the single desk for potash, to use his own words, would make Saskatchewan “transition from being price leaders to price takers.”

Both Lougheed and Wall, understand, as most farmers do, that competition among sellers leads to lower prices, and nowhere more so than in the commodity market, where product branding is difficult and requires coordination amongst producers. Lougheed and now Premier Wall want to make sure the price of a commodity critical to their provincial economies is not discounted and both recognize that a single desk is one of the best ways to address the problem.

The real question is whether Premier Wall will have the courage to defy an uncooperative Federal government, as Premier Lougheed did, when it comes to defending the economic interests of his province. Farmers can only wish that politicians, who understand the value of single desk selling in the natural gas and potash markets, could at least be a little more consistent and respect the rights of farmers to keep their own single desk sales agent the Canadian Wheat Board.

First published in the Manitoba Cooperator - November 4, 2010