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Canada's Prairie agricultural economy prepares for a seismic shift Add to ...

On the Prairies, the grain elevator was every little whistle-stop’s economic bulwark, and the railway was its lifeline. No one grasped that better than Jim Major, who, as a Saskatchewan Wheat Pool manager in the 1990s, shut down dozens of small wooden elevators across the arid, rolling southwest of the province.

He became a pariah in tiny communities as he delivered the harsh truth – the old terminals on branch railway lines were giving way to more efficient collection points on the main lines. At one town meeting, “I was fairly lucky to get out of there alive,” he says.

He survived, but the incident burns in his memory as his career winds down and the West faces another of its defining moments. This time, it’s not the small-town elevators that are on the chopping block, but an institution that has underpinned the economy of Canada’s breadbasket since the Depression.

A free-market-oriented Conservative government says it will scuttle the Canadian Wheat Board’s monopoly role by August, 2012, closing out 76 years during which it has been the sole marketer for Prairie farmers of two key crops, wheat and barley, selling up to $8-billion of their grain in a good year.

The board has fought back, conducting a plebiscite of 68,000 farmers, the results of which are expected Monday and are likely to show a majority in favour of maintaining the board’s exclusive role. But the Harper government has dismissed the vote as irrelevant to its process, arguing it already won a mandate for change in the federal election, in which the Tories won 51 of 56 seats in the three Prairie provinces.

It means the Prairie agricultural economy is in for a seismic shift, one that will play most heavily in small farm villages like Leader, Sask., that have held on to their precious grain elevators, but now face the transition to an era of open markets and farmers doing their own grain deals. Mr. Major, in fact, is one of the local heroes for helping save one of those endangered terminals on one of those branch lines. “We’ve been through a long, hard fight,” says Mr. Major, 65, who just retired as general manager of community-owned Great Sandhills Terminal Ltd., which operates a big concrete elevator near Leader.

The business, including the 200-kilometre railway that serves it, might have blown away like sand in the dunes in the nearby Great Sandhills desert. Its endurance is the product of community resilience – and, in Mr. Major’s view, the wheat board’s contribution of vital links in its supply chain.

Leader is a microcosm of an emotional debate ripping across the middle of Canada between anti-board forces, who want the freedom to sell their own grain, and supporters.

The debate tends to divide bigger farmers, who yearn to make their own deals, against smaller producers, who prefer the shelter of the board’s marketing role. Some say the board's demise would speed up their exit from the farming business, which has already seen a dramatic shrinkage in numbers.



The big grain-handling companies – particularly Richardson International, Cargill and Viterra Inc. (the former Saskatchewan Wheat Pool) – would benefit from the board’s demise. They could increase the volumes of grain they handle and the efficiency of their network of inland and port terminal and enjoy better access to rail cars, over which the board currently has much control. And the towns that are home to their large inland terminals might feel optimistic. Officials in Thunder Bay, for example, see new hope for its once-mighty, but now diminished lake port, which contains both Richardson and Viterra terminals.

But independent grain facilities and short-line railways appear more vulnerable – with the wheat board no longer there to guarantee their access to rail cars and port facilities – as do the towns that depend on them. The wheat board debate is played out against the broader cultural tension in places like Leader, where earlier generations built co-op institutions, such as credit unions and grain pools – to deal with distance, drought and Depression. Now Saskatchewan is a prosperous province with oil and gas, potash and canola.

Yet the struggle goes on to prevent small villages from withering away as young people move to the cities – or to the oil fields.

Indeed, Leader (population 1,000) keeps reinventing itself each time it encounters an external shock. It explains why the grain terminal survives as a core institution, and a key supporter of sports teams, charities and the local golf course. It’s why main street bustles with activity and farmers and merchants meet every morning for coffee at the hotel. For many, this vitality is linked to the wheat board.

Yet there are those who argue it is futile to stand in the way of the inevitability of change. It means that, in Leader, friends agree to disagree.

“I’m not a big supporter of the wheat board,” says Tim Geiger, a farmer who is reeve of the municipality adjoining Leader and sits on a local board with Mr. Major. Over the years, Mr. Geiger has grown disenchanted with the board’s exclusive role as the selling agent for his wheat. The agency is now largely irrelevant to him, he says, since he has moved much of his farm’s output into crops like canola, lentils and seed grain that he sells on open markets. He also believes the pace of farm consolidation will likely quicken, as more small producers feel compelled to leave the business.

Mr. Major, who still advises Great Sandhills Terminal, emphasizes that the board doesn’t just sell wheat and barley. He cites a list of its other, critical services – weather information, rail car allocation and logistics, and international business relationships. When China wants to buy a large volume of Prairie wheat, it is the wheat board that represents the farmers. It provides quality assurance and service for end buyers. The board arranges for producer rail cars that farmers can order to ship their own product to port, savings thousands of dollars.

“Be careful what you wish for because once it’s gone, it’s gone,” warns Wayne Hittel, chairman of the Great Sandhills terminal, who works as a mechanic at Leader’s John Deere dealership.







Yet if the board ultimately disappears, Leader will no doubt survive – it always has. In this community, “they just don’t just give up. They say ‘We were dealt a new hand here, so what do we do about it?’ ” says Lloyd Steier, a University of Alberta business professor who grew up in the nearby village of Prelate.

The town was originally called Prussia, but in the anti-German passions of the First World War, a renaming contest came up with Leader – honouring the fact that the Regina Morning Leader newspaper arrived each day by train.

By the 1990s, the region’s future hung in the balance, as wooden elevators on the branch line running through Leader came under pressure. So local investors banded together and, in partnership with the Saskatchewan Wheat Pool, built a 20,000-tonne concrete terminal.

But the new terminal was found to lean because of a construction flaw. What was intended to be a 20,000-tonne storage space could hold only 13,000 tonnes. Litigation among the partners ensued, and the local terminal investors ultimately bought out the wheat pool. A metal annex now provides extra capacity.

Then three years ago, when Canadian Pacific Railway wanted to shed the Empress Short Line running through Leader (with another short spur into Alberta), municipalities and investors – including the terminal company – stepped forward to buy it. Railway and terminal now gross more than $8-million from handling, storing, moving and marketing grain.

The key to Leader’s survival has been a redefinition of community. At one time, the village and nearby smaller places – Prelate, Sceptre, Mendham and others – saw themselves as separate communities. They had their own schools, their own main streets, their own hockey teams. They were each the hub of a 20- to 30-kilometre swath of prairie.

But in an age of faster transport and communication, these places are part of a much broader community, centred in Leader and stretching at least 60 to 80 kilometres in each direction. The terminal lies at its economic and psychological heart.

Mr. Geiger, the local reeve, voted against the wheat board in the plebiscite, but he knows its demise could be difficult for some of his neighbours. Under the board, some farmers never learned how to market their products, and now they would be thrust into the unfamiliar world of selling their own wheat. Many smaller producers would be distressed by the loss of their old, secure world, he says, and would head to the exit in greater numbers.

But the Great Sandhills terminal, he insists, can do very well in this new competitive era. Mr. Major and incoming general manager, Chad Campbell, are pushing to do more marketing in the United States. They talk of mergers or partnerships with other independent operators. If the wheat board survives in some form, it could be an ideal partner for Great Sandhills.

And they have a few aces up their sleeves. The company is part owner of a logistics consulting firm in Calgary, and has a minority interest in the Alliance Grain Terminal at the Port of Vancouver. The chances of survival are much better for grain handlers with guaranteed port access.

The town and the terminal have always thought outside the box. Earlier this summer. Jim Major was sitting around the office, shooting the breeze with Mr. Hittel and Mr. Campbell. “How about a ship?” Mr. Campbell said, and the three guffawed. It is a running joke, this crazy idea of a little prairie grain company owning its own ocean boat.

But why not? They know that wrenching economic transitions offer not just danger but opportunity. Mr. Hittel, the chairman, is not just speaking metaphorically when he says: “The world is changing rapidly and we have to stay on that ship or get off.”

POTENTIAL WINNERS

Big grain-handling companies: Richardson International, Viterra and Cargill will be able to exploit their financial and supply-chain muscle.

Big grain farmers: By making their own deals, many believe they will prosper.

Farmers close to U.S. markets: They will find it easier to sell and move their wheat and barley.

Free-market advocates: They have never liked the board’s monopoly power.

Trade lawyers: If Canadian grain swamps U.S. markets, expect more trade tensions.

POTENTIAL LOSERS

Small producers who lack clout, resources and expertise to make their own deals.

Grain companies that lack easy port access.

Farmers who rely on their own producer rail cars, now allocated by the Canadian Wheat Board.

Farmers in remote areas who depend on the board’s marketing and distribution.

Prairie traditionalists who worry about the loss of support institutions.

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