open i

The British milk market experience of dual marketing suggests that some protection of prairie grain farmers' marketing rights might be advisable. (615 words)

With last month's decision of the Honourable Chuck Strahl, Minister of Agriculture and Agri-Food and Minister for the Canadian Wheat Board(CWB) that marketing choice would be a reality by August 1, 2007, it might seem that this long and acrimonious debate was close to being concluded. Although 62 percent of those voting wanted change, close to half voted for change involving the CWB/pooling as an option and 38 percent voted for status quo pooling. Pool marketing is, therefore, likely to continue to be a popular choice for farmers.

In this respect the situation has similarities to what developed after the British milk marketing boards were disbanded in 1994. UK milk marketing was centralized in 1933 with price controls introduced in 1940. After 60 years of board marketing very few farmers had any experiences of marketing their milk.

So it was not very surprising that two thirds of UK dairy farmers elected to sign up with the Milk Marque pool. A successor to the milk marketing boards, Milk Marque provided a pool marketing service for its members. And further Milk Marque in the main attempted to use the same marketing techniques as the milk marketing boards had used.

There was no vote for deregulation of the UK milk market. It was the result of more than 20 years of failure of the UK to meet the European Union requirement that milk prices be negotiated on any "equal footing." And it would seem that ill will developed over those years between the private dairy trade and the milk boards.

Within a month of the market being opened up in November 1994 the Dairy Trade Federation, representing the dairy processors, complained to both the EU competition directorate and the UK Office of Fair Trade about Milk Marque's pricing practices. After a succession of unsuccessful attempts to resolve the situation informally, the Office of Fair Trade(OFT) in January 1998 referred the issue to the Monopolies and Mergers Commission for a formal enquiry. The claim it seems was that Milk Marque was using its position in the market place in a manner that might disadvantage consumers.

In July 1999 the commission recommended that Milk Marque, despite it popularity and the use of similar institutions in other EU countries, be split up into three regional pools. Power in the marketplace seemed, from trends in marketing margins that subsequently developed, to move into the hands of processors and retailers with no advantage to consumers.

After nearly eight years of frustration, dairy farmers this February had the satisfaction of a 100-member all-party, parliamentary group on diary farming recommending that an independent watchdog be set up to provide dairy farmers with the protection that OFT provides consumers. This was probably the first recognition that competition policy could be used against farmers and that there was a need to provide them with similar protection.

While the provision of marketing choice for barley can undoubtedly be implemented by order in council or cabinet decision, Prairie farmers would be well advised, if the UK dairy farmers experience is anything to go by, to have their rights to voluntary pool marketing enshrined more firmly in legislation passed by parliament.

Competition policy tends to be seen as safeguard for the consumer as in most instances this is where protection is seen to be needed. As was the case in the UK milk market, it might be very tempting in the heat of negotiation for its misuse to be threatened or attempted in the barley market.

David Walker
April 18, 2007