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Value added
The CWB is committed to facilitating and encouraging economically viable value-added processing in Canada because it increases domestic demand for wheat and barley. This helps the CWB fulfill its mission of generating higher returns for farmers.
Farmers have indicated their support of value-added processing, but not to the detriment of their own returns. The CWB has met this desire with a transparent, consistent marketing structure that treats all processors equitably and provides a stable supply of wheat and barley. This marketing structure puts Canadian grain processors on equal footing with each other and with mills and malting plants in the United States, while still ensuring the best return for Prairie farmers.
The Canadian National Millers Association has publicly stated its satisfaction with our approach to competitive pricing and its willingness to continue to work with us.
A test open market would bring this marketing structure to an end and would instead allow processors to offer farmers lower prices for their grain. New value-added enterprises with lower start-up capital and smaller volume needs would be unable to compete against large multi-national companies with the ability – and financial backing – to buy large volumes at a discount.
Destroying the domestic marketing structure and forcing farmers into a position of reduced returns cannot be considered a trade-off for increased value-added processing. That's because demand - not pricing - is what drives value-added processing.
The Canadian National Millers Association is aware of this fact and has publicly stated that creating increased manufacturing capacity does not necessarily lead to increased market demand.
Without an increase in consumer demand to purchase the processed products or increased consumption levels by consumers, even the most advanced, most well-capitalized value-added ventures will end up fighting for a small slice of the market-share pie – but the total market will not get bigger.
The CWB's marketing structure allows farmers to get the best price possible, while also allowing for a healthy, growing processing industry that provides a market for western Canadian grain.
Facts and Figures:
- Since the signing of the Canada-U.S. Trade Agreement in 1989, value-added wheat and barley processing in Canada has grown significantly. In fact, the largest customer for western Canadian wheat and barley is our own domestic processing industry.
- In 2001-02, approximately two out of every 10 bushels of grain (including wheat, durum and barley) were processed domestically, compared to one in 10 bushels a decade ago.
- Canadian wheat and durum milling has increased 31 per cent since 1991, compared to growth rates of 14 per cent in the United States.
- In little more than a decade, Canadian flour mill capacity has grown from about 7 700 tonnes per day to about 10 300 tonnes per day.
- Three new mills have been built in Western Canada in the past five years alone. Two have expanded since being built and one is expanding later than this year. Three other Canadian mills have expansion plans underway.
- A new mill is currently being built in Chiliwack, B. C. that represents a $25 million dollar investment. This positive situation can be compared to the dismal state of the U.S. milling industry that has seen 23 mills close since 2001 – equivalent to closing about 50 per cent of the flour milling industry in Canada.
- Per capita, wheat processing is greater in Canada than the U.S., with increases in the processing rates exceeding our national population growth.
- As one of the world's major malt barley exporting countries, Canada has experienced the world's greatest increase in malt capacity over the last 15 years, adding over 350 000 tonnes of capacity, for an annual total of 1.2 million tonnes. In contrast, U.S. malting capacity has actually declined over the same period.
- Canada malts four times more barley per capita than the United States.
- The malting industry in Western Canada has shown tremendous growth in the face of free trade. In 1980 only 55 per cent of total Canadian malting capacity was located in the west. Now in 2003, 75 per cent of domestic malting capacity is located on the Prairies, a result of increased demand from international markets that have nearly doubled to 700 000 tonnes (in barley equivalent) annually.