The Canadian Wheat Board (CWB) today denounced preliminary tariffs imposed by the U.S. Department of Commerce (DOC) in its ruling on American charges of dumping. These tariffs of 6.12 per cent on spring wheat and 8.15 per cent on durum are in addition to the 3.94 per cent duties imposed by the Americans in March over subsidy allegations.

"Western Canadian farmers do not dump their grain into the U.S. market or anywhere else," said CWB Chair and farmer-elected director Ken Ritter. "We don’t need to. We produce some of the world’s highest quality grain, for which our American customers have testified they are willing to pay a premium."

Ritter pointed to two previous investigations by the U.S. International Trade Commission (ITC), which found that Canadian wheat and durum sells in the U.S. market at higher prices than the equivalent American product. Over a total of 96 months, the ITC found Canadian prices were higher in all but two months.

Ritter noted that at an ITC hearing in October 2002, speakers representing 90 per cent of the U.S. milling industry and 90 per cent of the retail pasta market refuted charges that prices for Canadian wheat are lower than U.S. grain. In one instance, a buyer testified: "If they’re dumping, I’m the worst pasta durum buyer in the country, because we’ve never seen values below Minneapolis values on a head-to-head comparison, never."

Ritter expressed frustration with the process behind the dumping determination because farmers’ costs of production (COP) have been added to the equation. "It would make sense to look at this if the challenge was directed at industrial manufactured goods – like steel - where the costs of production are fixed," he said. "However, it defies common sense to apply these same rules to farming, which is governed by many uncontrollable factors, most notably the weather, with unpredictable final price fluctuations."

Furthermore, Ritter noted the DOC established the COP by using information from 27 randomly selected farmers to represent costs for 50,000 western Canadian spring wheat farmers. "Determining the cost of production based on information from 27 farmers is far from statistically valid," Ritter said. "However, we are very grateful to these farmers for cooperating with the DOC and helping us defend our access to the American market."

Despite today’s preliminary ruling, the CWB remains open for business with its American customers. These customers will determine whether the tariffs are prohibitive, a decision which will vary from buyer to buyer. The CWB will explore all available options to obtain the maximum return for the wheat and durum grown by western Canadian farmers.

The CWB sells a combined average of 1.5 million tonnes of wheat and durum, worth around $400 million, into the U.S. each year. This represents about 10 per cent of total sales.

A final determination in the case is expected later this summer.

Controlled by western Canadian farmers, the CWB is the largest wheat and barley marketer in the world. As one of Canada’s biggest exporters, the Winnipeg-based organization sells grain to more than 70 countries and returns all sales revenue, less marketing costs, to Prairie farmers.

Facts about the U.S. trade challenge

• The North Dakota Wheat Commission and U.S. Durum Growers launched a petition in September 2002, asking the U.S. government to initiate anti-dumping and countervailing duty investigations against Canadian wheat and durum imports. They allege that that the CWB "dumps" wheat and durum into the U.S. by selling at below "normal" market prices and that the Canadian government unfairly subsidizes Canadian wheat and durum. Both allegations are unfounded.
• Today's announcement concerns the anti-dumping case. It is the preliminary determination, which requires investigators find a "reasonable indication" that the allegations have some basis in fact. The imposition of tariffs occurs at this stage in the vast majority of American trade cases since there is a relatively low burden of proof. A final determination is expected this summer.
• Canadian wheat and durum sells in the U.S. market at higher prices than the equivalent American product. This fact has been proven by hard evidence provided through two investigations by the U.S. International Trade Commission (ITC). American millers say they buy Canadian wheat for quality and consistent supply.
• Dumping is defined as selling into the U.S. at prices below "normal" values -- in this case, Canadian market prices. For spring wheat, investigators also decided to factor in western Canadian farmers' cost of production (COP) to determine whether some sales were being made below COP. Their COP estimate was based on per-bushel costs of just 27 farmers during a single year (2001-02).
• Western Canadian farmers do not dump wheat. Anti-dumping rules on COP make little sense when applied to agriculture. They were not designed for agricultural commodities like wheat, but premised on an industrial manufacturing environment where a relatively small number of producers can control costs and production levels and engage in predatory pricing.
• In grain farming, low global prices may mean that some sales are made at prices which are unavoidably below farmers' cost of production. Wheat prices are set by global markets and can fluctuate unpredictably in a given year due to factors like weather, exchange rates, supply and demand. Farmers' costs are sunk long before prices for the crop can be known with any certainty -- meaning that, in some years, not all costs will be recovered even though sellers are always trying to maximize returns. That does not translate into "dumping."
• This investigation is an American domestic trade action, carried out under U.S. trade law and investigated by the U.S. Department of Commerce (DOC). The DOC made a preliminary ruling in the countervailing duty case on March 3, resulting in tariffs of 3.94 per cent on hard red spring wheat and durum imports to the United States.
• At the same time, the U.S. International Trade Commission is also investigating whether injury has been caused to the U.S. wheat industry by Canadian wheat/durum imports, with a finding expected this autumn. Tariffs will be retroactively removed if no injury can be shown.