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The CWB’s influence on the Canadian wheat industry is evidenced by its control over the “middleman sector” between producers (farmers) and users (millers or foreign buyers). The US wheat industry’s middle- man sector comprises several producer cooperatives and small and large grain trading firms. By contrast, Canada’s middleman sector is based on the CWB producer pool system, which amounts to a monopoly over the marketing of western Canadian wheat.48 In turn, the CWB has created a network of accredited exporters, who act as marketing agents.49 In 1998,

48. Under the producer pool system, the CWB has the flexibility to market over long peri- ods. The US government argues that a pooling system makes it difficult for end users of wheat to manage their risk because they are prevented from selling surplus wheat stocks ex- cept to the CWB. The CWB sets initial prices for four marketing pools at the beginning of the crop year; the Canadian government guarantees the pools. The CWB-controlled pool system has proven costly. In January 2003, the Saskatchewan Wheat Pool nearly filed for bankruptcy with debt reaching $191 million. In June 2002, the Canadian House of Commons recom- mended that grain farmers be free from obligations to sell all of their wheat and barley crops to the CWB. See “Saskatchewan Wheat Pool in Financial Crisis,” Canadian Broadcasting Corporation, January 31, 2003, www.cbc.ca (accessed in March 2003); and “Canadian Com- mittee Recommends Change to Wheat Board Operation,” Inside US Trade, June 21, 2002.

49. Accredited exporters are Canadian grain companies, Canadian subsidiaries of international grain companies, or other international grain companies. They are instrumental in allowing the CWB to sell into markets that previously depended on centralized buyers but now have many private companies sourcing grain. While they may sell grain to many customers, they have to buy Canadian grain solely from the CWB. Conversation with Brenda Brindle, general manager, Alberta Grain Commission, March 2003; and Martin, Mayer, and Bouma (2002).

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Institute for International Economics | www.iie.com

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