From the Smoky Lake Signal, Nov. 7, 2001. Used with permission.

A History of the Alberta Wheat Pool

The Alberta Wheat Pool was the first of the Pools organized in the prairies. It was an outgrowth of earlier experiments in central wheat selling conducted by the government appointed Canadian Wheat Board in 1919.

Wheat has been an important commodity in world commerce from the time of the Romans who bought it from North Africa and Russia. Even in early times the trend was towards monopolies and a great many fortunes were made. With industrialism in Europe in the 19th century the growing towns increased the demand for food. With the low cost ocean freight extensive areas of United States, western Canada, Argentina and Australia were opened up. Modern grain marketing started with the Chicago Board of Trade in 1848 and the Liverpool Corn Exchange of 1853.
The Winnipeg Grain and Produce Exchange started in 1888 as a cash market. But in 1864 futures markets were established (1903 in Winnipeg). The present Winnipeg Grain Exchange is a direct successor. Theoretically it just provides a meeting place for traders, including grain dealers, flour mills, exporters, importers and speculators.

Speculating is where future trading comes in. It permits the making of contracts for the purchase and sale of grain, for delivery during specific months in the future. The Winnipeg Grain Exchange had deliveries in October, December, May and July.

When the time comes due for the grain it must be delivered in a terminal elevator at the lake head for the contract to be fulfilled.

From futures trading comes hedging. It started during the civil war in the States. Holders of grain wanted to protect themselves from risk of loss on fluctuating prices. Elevator companies, for instance, buying wheat from the farmers would sell it on the futures market for as close a price as they just paid. That way the elevators can't lose on the transaction while the grain is moving to the terminals. Later, when the wheat reaches a terminal elevator at the coast, it can be sold for export or flour millers. Then receiving the cash for the wheat the elevator company buys back their position on the futures market. Or an elevator can deliver wheat against the option, also receiving cash for the grain. Flour millers can protect themselves too.

But the system works best when there is a shortage of grain. To get good prices, the volume offered for sale had to be limited. When crops were good and production was high, prices dropped and the farmer was in trouble.

In poor years, when wheat, the main food supply of millions in the world, was scarce, prices soared and people went hungry. The system provided wide variations in price but the man at the bottom, the farmer, was unprotected.

Because of speculators trying to corner the market, gaining a monopoly on the supply to the point of controlling the price, the system made for wild shifts of prices that no longer responded to supply and demand.

Everyone, from actors to clam diggers, were getting in the act, buying futures in the early 1920s. Most of the speculators lost money. Supporters of the system said that restricting the market to the physical handlers of wheat would only leave the farmers and elevator men as sellers and the buyers - the millers and exporters. The quantity of wheat offered at harvest time always exceeds the demand and if there are no other buyers in the futures market the prices would simply plummet.

In theory the speculators rendered an important service by competing with the millers and exporters. They helped pay for carrying the surplus and usually lost money doing it.

The British millers and grain dealers liked it because on the average the gambling on price meant cheaper prices for them.

Then came 1914 and the "war to end all wars". Until then European nations fought wars with their own food and whatever they could pillage from captured lands. But the First World War was won mainly on food imported from overseas. The blockade of Germany and Austria, and their starvation, contributed to their defeat.

Both Canada and the States increased their farmland and their yields. The per acre average wheat yield in Alberta in 1915 was 31 bushels an acre. Great Britain set up a government wheat purchasing commission and cornered the Chicago and Winnipeg Grain Exchanges, the biggest corner in history.

The Canadian government responded with a Board of Grain supervisors in 1917 to prevent the "undue inflation or depreciation by speculation or hoarding of grain". The Canadian Board of Grain paid producers $2.40 for the 1916 crop. The price was soaring even higher in the States until their government intervened and put a ceiling on it. So the farmer, sure enough, was cut out of high prices.

After the war Europe went back to producing much of its own food. The Canadian Wheat Board was established in 1919 when the Board of Grain, as it was called, paid growers outright when grain was delivered to the elevators. The Wheat Board paid an initial price of $2.15 a bushel and participation certificates entitling the farmers to further payments as the wheat was sold. The final payment got up to $2.63 a bushel.

In 1920 the Winnipeg Grain Exchange was open for free trading and the Wheat Board ceased to exist.  Prices rose to $2.85 then started down steadily until it reached $1.07 in 1923. In the meantime war time inflation had upped the price of everything from groceries to farm equipment, municipal and school taxes doubled and nothing was ever as balanced or as good again for the farming community.
Oats in 1920-23 was 35 cents a bushel, barley 42 cents, hogs $11.50 a head, cattle $25.00 a head. Having expanded their operations during the war most farmers were, in debt. Interest was as high as 10%. As a solution to the surplus of grain, farmers were encouraged to go into beef cattle raising. Those who carried their animals over the 1919-20 winter lost their shirts. It was a purgatory of deflation on assets, while the value of money was maintained.

Farmers on the prairies urged the federal government to reestablish the Canadian Wheat Board. The grain traders, millers and eastern consumers argued that since the States wasn't going to renew government control over wheat marketing, Canada didn't need to either. The market should find its natural level.

The idea of the Wheat Board was to avoid over selling grain at the time of peak deliveries during harvest. That is what usually leads to price decline and could be avoided.

Said a commission report at that time, under a system of national control, when only one seller exists and buyers are numerous the advantage is with the seller.
The commission recommended the setting up of a United Farmers Grain Co-operation to act as a pooling agency and sell members' wheat.

Said Saskatchewan's Premier Dunning, "the results of a single export marketing director would be better than an average price obtained by 100,000 farmers. Farmers think that when grain is on the rise it will keep on rising and when grain is on the drop it will keep on dropping. As a result they hold when the market rises and sell when it drops."

Farmers in the days before regular radio broadcasts didn't have up to date information on markets. And, a farmer having spent several hours delivering a load of wheat with a team and wagon wasn't in a good position to haggle over price when he got to the elevator. He took the bid offered or took his grain home - and no cash to buy what he needed.

Both the legislatures in Saskatchewan and Alberta passed an act to push for a federal Wheat Board. Manitoba, home of the Winnipeg grain merchants, refused. Still it was a good time politically for the west. 38 out of the 42 seats in the prairie provinces were candidates of the Progressive Party. They had a total of 65 seats in Ottawa that year. Conservatives 50, Liberals 117. They held the swing vote.
The Alberta and Saskatchewan premiers met to set up a wheat board without Manitoba, but believe it or not, didn't when they said they couldn't find someone qualified to run it.

At the winter convention, 1923, of the United Farmers of Alberta, a committee was set up to meet with then Premier Brownlee to consider setting up a Wheat Pool just in Alberta. The United Farmers of Alberta was at their peak of power and prestige in the 1920s. They caught the political bug and ran in the general election of 1921, electing 39 members in a 61 seat legislature. They were Canada's first farmer provincial government.

With the advice of a California lawyer who had been organizing fruit and tobacco growers in the States the first meetings to start a Wheat Pool were held. The Yankee, Aaron Sapiro, said the province could be organized in 30 days, cooperatism works. He suggested the Pool be a non share, non profit organization responsible solely for selling wheat for the best advantage. One man, one vote, a contract would be required of each member to deliver all of his commercial wheat to the Pool for a period of five years. At a minimum 50% of the farmers in Alberta would have to sign up. He rightly suggested that not all the grain dealers would be opposed to such a Pool and some would be willing to cooperate and sell their elevators to it. If Canadian banks wouldn't loan the money, New York banks would. Make it a no politics, straight business organization from the ground up.

The committee that was struck borrowed $5,000 from the provincial government to pay for the initial organization expenses and a two week membership drive was held during harvest. Canvassers came close to their objective, 50%, and gave everyone who wanted a chance to pull out. When few withdrew they started the Pool.

United Grain Growers grain company, and later the Alberta Pacific Elevator company, agreed to accept Pool deliveries in their facilities. That gave the new Pool a 50% share in the province's elevator facilities. Other elevator owners offered to sell their buildings. Initially the Pool wasn't interested. They wanted the companies to handle Pool grain on a similar basis as was done for the 1919 government Wheat Board.

The Alberta Wheat Pool contracted the handling of "Pool wheat" with the existing grain companies. The grain was purchased from the farmer by the Pool for an initial price. The sale proceeds were put into a pooled account and if there was a surplus in the account at the end of the year a final payment was made to producers on the basis of their sales to the Pool. Everyone got the same price - no more volatile markets.

The Pool hired its first managers (at salary of $7,500 a year) and applied for a seat on the Winnipeg Grain Exchange. The banks wouldn't lend the Pool any money until the Government of Alberta backed the Pool with a guarantee. The Pool's first manager died after his first year, but did get it going. He was 33.

The office was rented, the furniture used, kitchen tables were desks - but working in shifts into the winter months, the work commenced. They had to keep track of deliveries from 26,000 farmers delivering grain in hundreds of shipping points. One account was kept for each farmer, listing his payments. As well the Pool kept track of business done by the elevator companies as they received the grain from the farmers and forwarded it to the terminals and flour mills.

Most of the other elevator owners in the province soon agreed to accept Pool wheat when they realized that otherwise they would just get 1 3/4 cents per bushel for elevating and car loading. They would do better working with the Pools.
Now for marketing. The Alberta Wheat Pool hired an agent for $17,500 a year to make direct sales of Pool grain to flour milling companies in Canada and over  seas. As well they exported grain directly. And although considered heresy by the farmers the Pool used the services of the Winnipeg Grain Exchange. Because the Pool had borrowed millions from the bank they had to protect their margins and that meant the Grain Exchange. Back to hedging.

Still the Pool did all right the first year and passed a motion to deduct 2 cents a bushel to be set aside for the purchase and construction of Pool elevators - the first of the levies to be credited to members' accounts as reserve".

In the first year, 1924, the average price for No. 1 Northern Wheat was $1.03 a bushel, 34 million bushels sold. 2/5 cents per bushel was deducted for administration costs. The farmer got $1.01 per bushel, an efficient operation. $200,000 was put in a commercial reserve.

Soon Saskatchewan and Manitoba followed with Pools of their own. They set up a central selling agency to develop orderly marketing for their members' grain under cooperative control and administration. The idea again was to by-pass the speculative market and direct sell to the consumer with as few intermediaries as possible. The hope was to eliminate high prices at one time of the year and the low prices in another.

The Pool, by selling through 27 agencies in 15 wheat importing countries on four continents, sold 60 to 75% of the wheat through direct sales. Not bad for the first year in business.

In 1925 the price of wheat soared to $2.17 a bushel in January. The central selling agency gave a hefty interim payment of 35 cents a bushel after an initial payment of $1/bushel. And then out of the blue sky the price began to drop. By April 3 it bottomed out at $1.36. As the price of wheat got close to the combined initial and interim payment of $1.35 already made by the central selling agency, rumours circulated that the Wheat Pool selling agency was in financial trouble.

The Pool directors concluded that a "bear raid" was in operation. The Pool started to buy wheat futures, 3 million bushels worth. The heavy buying upturned the market, with the result there was a rush by the raiders to cover their heavy short sales. The Pool was out of trouble and made a tidy profit. Within 8 days the price of wheat was forced back to $1.69. Pool purchases were sold and the profit, $486,000, realized.

On two other occasions the central selling agency also purchased future contracts to stabilize the price.

In the spring of 1929 and 1930 they made another half million the first time, but lost $2 million the second. The Pool was widely accused of gambling in grain with their members' money, and even worse losing it. To put it bluntly the Pool's salesmen were too confident after having made almost a million dollars in their first two ventures and lost double on their third try.

The Pool, in those years, grew dramatically. Not only in sales, but in assets. The farmers had found that although the other line elevator agents accepted the Pool wheat it was often held back in the country elevators, while company wheat was given priority and shipment.

As a result the Pool salesmen had difficulty in meeting demand for certain grades of wheat due to the holdbacks. The farmers wanted their own elevators too, not just a sales outlet.

Some of the farmers already owned shares of United Grain Growers Ltd. and meetings were held by the Pool to buy UGG. Of the 979 country elevators in Alberta in 1925 UGG had 185 of them. But the deal broke down.

UGG was started in 1906 by Manitoba area farmers to fight the monopoly of the privately owned elevator companies. These private companies came about because the CNR at the turn of the century didn't have the money or the desire to get into the grain handling business itself. It offered monopolies of grain handling along their line to any private elevator companies wanting to build. As well they gave the companies free leases and promised that only the elevators would get to load grain into Canadian Pacific rail cars. In a short time 450 country elevators were built.
But from the monopolies the farmers had to accept street prices on their wagon loads of grain, instead of car lot prices and accept whatever grade and dockage the elevator operators would determine. Farmers protested to parliament with the result that there was the first of a long line of royal commissions on transportation of grain, in 1899.

The commission decided in favour of the farmers, recommended the compulsory construction of loading platforms by the railroad and gave farmers the legal right to obtain railcars from the rail companies, just as the elevators could. The Canadian Grain Act, as it is now called, is considered the grain producers Bill of Rights. Not that having the right to load their own wheat got the farmers the grain cars. The elevators ordered theirs first, few were left for the farmers.

In these pre-auger days, loading your own car, with a shovel, saved 1 3/4 cents a bushel or $17.50 per thousand bushel grain car. Some of the farmers sued CPR for failure to live up to the act, as far as distributing railway cars, and won $50 in costs. Not much, but it did mean establishing the car order book system. First come, first serve for car allotments.

Meanwhile farmers in Manitoba raised $25,000 to start the Grain Growers grain company. They bought a seat on the Winnipeg Grain Exchange and offered other farmers the prospects of patronage dividends based on grain deliveries and not
stock holdings, if they used UGG. The Grain Exchange called it commission splitting and threw the company out. It was years before the patronage system was available to grain producers in the west.

Meanwhile farmers pressed the Manitoba government to establish a government owned and operated elevator system. The government purchased 163 country elevators at a cost of $1 million and within two years was running a $84,000 deficit. They paid too much for too many old elevators. UGG, in 1912, leased them from the government and eventually bought them.

In Alberta, the United Farmers of Alberta, a union of two earlier farm groups - the Society of Equity and Alberta Farmers Association - pressed their government to loan the newly formed Alberta Farmers Co-operative Elevator company 85% of the cost of building elevators to be run by the local co-ops who put in the rest of the money. They hired their own engineers, obtained sites and with farm labour built the elevators.

But the Alberta government would not provide working capital or guarantees, so the Alberta version of UGG had to rely on UGG in Manitoba, for finances.
When they went into commodities such as coal, flour and binder twine, they lost money - too much diversity of interest. (Shades of today).

Alberta Farmers' Association merged with United Grain Growers in Manitoba to form UGG. By the time the Alberta Wheat Pool started in the 1920s the two groups, UGG and Alberta Wheat Pool, had agreed to not build or buy elevators in each other's territory. Since the Pool couldn't buy UGG elevators they built their own. The Wheat Pool's first elevators stored 40,000 bushels and cost $13,000. The Pool also purchased private elevators and by 1927 had 41 of them at an average price of $10,000 each, which sometimes included the agent's dwellings, coal and flour sheds. They built 51 of their own.

The Wheat Pool terminal, constructed in 1929 in Vancouver, was the largest in the world, at $2.9 million. An even better deal for the Pool, for $100 a year they got to rent a federal government terminal at Prince Rupert which cost the government $1.2 million to build. Since it was out of the regular ocean trade lanes, other grain companies didn't want to lease it.

The building of elevators continued throughout the years until in the 1960s the Wheat Pool had 567 elevators.

In 1928 the combined Alberta, Saskatchewan and Manitoba Wheat Pools were the biggest business concerns in Canada with a cash turn over of $323 million. Their revenues exceeded that of Canadian National Railroad by $47 million. Membership in the three Wheat Pools totalled 140,000 farmers with 25,000 square miles of wheat land under contract. The Pools were the world's largest grain selling businesses, with the largest number of elevators on earth - 1,642 in the three provinces. They exported grain directly to 19 different countries, from the United Kingdom to Japan, Italy and France.

From 1924 to 1928 they bought their elevators without government loans, issuing bonds or stock. They paid for them with the 2 cents a bushel deduction from member's grain.

While the original UGG in Manitoba had tried to pay patronage dividends the Winnipeg Grain Exchange stopped it calling the plan "commission splitting". The Pools, by 1925, were so big the Grain Exchange couldn't complain. At one point $7 million was given out in patronage dividends from 1925 to 1928 in Alberta. As well, the farmers earned 6% interest or $600,000 on their reserves over the 7 years. In trying to handle the huge 1928 wheat crop the Pools paid farmers to store their own wheat on the farm. The 2 cents a bushel in Alberta was worth $400,000.
The Canadian Wheat Pool (Alberta, Saskatchewan and Manitoba's) was described as the greatest agricultural co-op in the world. Then came 1929.

The crop the year previous was the biggest in history and there was lots left over. The wheat crop in Argentina that year was also exceptionally large and was sold at levels well below that of Canadian wheat. The Pool's directors got edgy. Wheat prices continued to drift downward. The price of wheat on the Winnipeg Exchange dropped to $1.06 in May. To stop the slump the Pool started to hedge. They bought 6 million bushels of future wheat contracts. The markets reversed, futures were sold and a half million dollar profit made.

The summer was dry. With the adverse crop conditions, speculators pushed the price of wheat up to $1.78. Black Friday, October 29, 1929 the stock markets collapsed. Commodity prices were also affected. The price of wheat started down and didn't stop until 1932 when it hit 38 cents a bushel. The Alberta farmer delivering a wagon load got 19 1/2 cents per bushel at his local elevator. It was the lowest price for food grain in history.

The Wheat Pool, throughout 1929 and 1930, held back its grain and even bought future's contracts to push up the market, another 6 million bushels. But this time it didn't work and the Pool lost $2 million. The banks carrying the Pool loans were getting anxious. The Pool that year sold only half the crop.

Wheat Pool delegates sailed to Europe to find out why no one was buying. The 1929 European wheat crop had been a good one and the dry grain had been threshed in good condition. They didn't need to mix as much northern hard wheat with it to make bread. As well there was a tremendous vegetable crop harvested and it became a cheap substitute for bread and a feed stock for livestock.

To protect their own farmers France raised the duty on wheat from 20 cents a bushel to 53 cents. Germany from 32 cents to 42 cents, Italy from 58 cents to  73 cents. Regardless of the added costs to domestic bread consumers and the poor quality of the bread produced the Europeans were determined to protect their farmers.

Great Britain bought Argentinian wheat because it was cheaper. The public accepted the poorer quality without protesting. The high duties in Europe pushed the domestic price so high that farmers were selling all their wheat and they and their families eating cheaper substitutes. Back in Canada the banks were demanding their money. The Pools asked the prairie governments for help. The Canadian Wheat Pools owed $99 million to the banks.

The provincial premiers considered asking for help from the federal government.
The price of silver dropped, putting the Far East out of the business of buying wheat. The Soviet Union suddenly reappeared in 1930 as a wheat exporter. France raised the duty on importer wheat to 84 cents, Germany 97 cents, Italy 73 cents. The Spanish government refused to allow wheat to be imported until the domestic price reached $1.76 a bushel. The Pool sales manager in Canada said that they had never realized that consumers in European countries would be satisfied to eat poorer bread when their governments insisted that their own desperate agriculture industries required such drastic measures of protection.

On July 30 the banks cut off the Alberta Wheat Pool's credit. The Alberta Pool borrowed funds from the Saskatchewan Wheat Pool until the banks relented.
The milling trust in England accused Canada and the Wheat Pool of trying to hold up the price of wheat, increasing the price of the people's bread. A rumour was circulated and later denied that a British bakery firm advertised that it didn't use Canadian wheat in their bread.

The millers had hoped to force the price of Canadian wheat down. The Wheat Pool kept Canadian wheat off the market in hopes the price would rise. It didn't.
Finally the legislatures in the three prairie provinces passed legislation guaranteeing the banks against financial loss from their loans to the Pools. Otherwise, said Premier Brownlee, if the Pool's wheat were thrown on the market immediately the crash would ruin the economy of the west.

The attempt by farmers to have a say in the price they would get for their product, the way it would be merchandised, and keeping it under his control until it passed into the hands of the ultimate consumer, had failed.

By October of 1930 the three prairie Pools knew that they had overpaid the farmer on the delivery of the 1929 crop by $20 million. The Pool paid an initial price of $1.00 a bushel - but sold it for 85 cents a bushel to lose $5.6 million. Premier Brownlee of Alberta suggested that the final payment of $2.7 million, due to members on the sale of the 1928 crop should not be paid out but applied against the overpayment. With the Pool so far in debt , and the government on the line, the taxpaying public wouldn't approve. He suggested the Pools go to the banks and make a public bond issue with gradual repayment. The banks refused to accept the Pool bonds and demanded, and got, provincial government bonds instead. The government accepted the Pool's bonds. It took until 1947 to pay them off.
The provinces went to the new Prime Minister of the day, Honourable R.B. Bennett, a westerner who appreciated the Pool. The province asked the federal government to guarantee the banks against loss on an initial payment of 70 cents to the farmers for 1930 wheat. The prime minister dodged it and said wheat marketing was the responsibility of the provinces. He raked the Pool over the coals saying they should have sold the 1929 wheat crop at going prices.

After the near disaster associated with pooling wheat, Alberta Pool and the other grain cooperatives decided to abandon price pooling in favour of operating a grain company. They lobbied the federal government to take over price pooling - and formed the Canadian Wheat Board. Not everyone wanted a compulsory pooling.

Members of the Saskatchewan Wheat Pool who favoured compulsory pooling of all wheat across the province tried to force it through. A majority of the Alberta Pool members were not in favour of legislation compelling other farmers to join the organization. There is a difference between cooperation and compulsion. It took another five years to establish the Canadian Wheat Board (1935).

Meanwhile the wheat planted in fields all around the world kept growing and so did the surpluses. Canada's 1930 wheat crop was 4.4 billion bushels, 265 million higher than 1929. Soviet Russia, desperate to industrialize, exported wheat to buy needed machinery. The peasants there, resisting a governmental move to create collective farms, slaughtered their livestock. Russian Premier Joseph Stalin later admitted that his collective farm policy wiped out 10 million farmers over a four year period. In defense of his actions he said that mechanized agriculture on large scale collective farms had to be established to prevent recurring famines. Doing it was mass murder by starvation.

There were few speculators left for the Winnipeg Grain Exchange when the elevators sought to hedge the purchases. The price of wheat continued on the skids. The Wheat Pool reduced its initial payments from 65 cents to 55 cents and then to 50 cents. Prices on the Winnipeg Grain exchange collapsed, creating a panic. The price of wheat in the pit dropped to the lowest level in the Exchange's history. The lending banks wanted to close out the Wheat Pool completely. The only thing that restrained them was the horror of having 26 million bushels of wheat land on their laps. The provincial premiers went to Toronto to convince the banks to hold on.

On the prairies, noisy meetings of farmers saw demands for no more evictions for farm mortgage indebtedness or tax arrears, and a call for a guaranteed payment of at least $1,000 a year for every farmer (the money was to be raised by the federal government from taxes on banks and businesses). The farmers also wanted free medicine and hospitalization, a reduction in the costs of manufactured articles, a guaranteed price of $1.00 a bushel for wheat. A group in Saskatchewan demanded that the west should secede from Canada and establish its own government and free trade with Great Britain. The provincial premier demanded that Ottawa establish a domestic price for wheat, or as an alternative a stabilization board with a guarantee of bank loans. Otherwise he said the Canadian wheat market was simply the target for speculators in both Canada and the United States.
With the provinces already having taken out a mortgage on the assets of the provincial Pools -  the elevators, buildings and other property, the only hope left was the federal government.

Prime Minister Bennett relented and said the federal treasury would guarantee the Pool loans. There was a price tag, he set up his own overseer of the Pools, John McFarland, who had been the president and general manager of Alberta Pacific Grain Company, which Bennett and Max Adkens (Lord Beaverbrook) owned until 1916 when they sold out to the British milling concerns.

McFarland demanded that the Pools give up their sales offices overseas. The grain exchanges of the world were used instead. The grain traders won.

McFarland, with Premier Bennett's blessing, began to hedge the price at 50 cents a bushel. "If we can't get that," said Prime Minister Bennett, "the country is done for." It was the start of the federal government's policy of wheat price stabilization.
When the opposition was critical in the House of Parliament, Bennett said he was trying to safeguard the interest of western farmers upon which western Canada has prospered in years gone by, and by its purchasing power has kept the factories of the east going. Of course the west is benefitted from relief measures. Why? Because we have a small population of people inhabiting a large area who produce more wealth per capita for Canada than any other pioneer people in the world.
In Russian exports kept increasing. They starved their people. Millions died.
Great Britain switched to Russian wheat. It was cheaper.

The Australian government inflated their currency so they could undersell Canadian wheat to the far east, another market gone.

Saskatchewan tried to force all farmers into the Pool. The bid failed. Alberta Wheat Pool voted to split with Saskatchewan and Manitoba Pools and go an their own. The three Pools split up, each released their membership from the delivery contracts, but each continued to operate the Pool elevator systems for the general handling of grain. Each Pool operated a voluntary Pool within its provincial borders. The era of socialism had ended.

Each provincial organization now functioned in the same manner as privately owned enterprises. The farmers were assured that in the new Pool that year's grain would be dealt with as a separate crop and couldn't be used by the Pool to pay debts or obligations of the past years. Alberta Wheat Pool still had a $5 million overpayment from the 1929 crop to cover.

The Alberta government issued bonds at 4.5% interest for the next 20 years to cover the debt. It took that long to pay it off.

The Wheat Pools continued to campaign for the establishment of a Wheat Board.
UGG first proposed and then agreed with the idea.

Canada's then Prime Minister, R.B. Bennett, gradually swung towards the Pool's viewpoint. "It may well be," he said, "that the Pools have tried to push their project onto the world without understanding what was involved, and met with disaster. They were opposed by the great interests, but the Pool has done more to enable the western farmer to care for his obligations and deal with his economic life in an orderly manner than any other single thing."

In 1935 he introduced a bill to establish the Canadian Grain Board (now Wheat Board) with powers to purchase, receive and take delivery of wheat, oats, barley, rye and flax seed. The elevators and facilities were declared by parliament to be works for the general national benefit. The compulsory nature of the legislation was much debated.

Before the bill could be passed it was gutted. The Board's operations were made optional and excluded coarse grains. But it did have the power to set a minimum price for wheat. They set it at 87.5 cents for 1935.

In the federal election of that year the Liberals won an overwhelming victory. Ex-Prime Minister Bennett's friend, Mr. McFarland, was tossed out of his job at the Canadian Wheat Board. McFarland said that he had closed the overseas agencies of the Wheat Pool to work through the Grain Exchange in hopes that conditions would return to normal. Theoretically the open futures system is ideal for the handling of wheat, if it works. But when it fails to function it does so because of world wide subsidies, over supply and the absence of speculators to carry the hedges. When it does, said Mr. McFarland, his sympathy leans entirely to the producers.

The situation of his bitter depression years sounds so similar to today. Over production of wheat throughout the world, in the 1930s, created a situation where world price had ceased to exist. How could there be when production was subsidized in almost every country, and every country had its own price?  Australia put up $60 million in direct grants to its wheat growers and indirectly 25% in depreciated currency. United States paid $200,000 to stabilize wheat prices and hundreds of millions in processing taxes on consumers to provide benefit payments to farmers. In the United Kingdom, which produced little wheat, consumers paid $100 million for the benefit of their wheat farmers.

Still the new Canadian Wheat Board, throughout those bitter years, by hedging and selling for the benefit of the Canadian farmer, kept the market from total chaos. It did use government support, the first of its kind in Canada. $200 million of government money was invested in wheat in 1935, or 289 million bushels. Some of it was still carry over from the 1930 crop. Then, as now, someone else's disaster finally changed the markets in 1936.

The Australian crop was down. The United States crop was so poor that they had to import wheat. Argentina's crop was low too. It was the worst crop failure in history. Riots threatened the countryside and the Minister of Agriculture in Argentina was shot in a debate. But the price of grain finally started to rise. In one of those unfair moments, to protect the rich, the Winnipeg Grain Exchange put a restriction on the daily movements upward of 3 cents a bushel. The United States set their restriction at 5 cents. It kept the bear market from going bull.
Canada, with its huge over supply of wheat, through the Canadian Wheat Board could have had an absolute corner on May wheat and taken everyone in the grain trade - from dealers in Canada to flour millers throughout the world. They didn't force the issue and slowly sold the wheat surplus down.

The price of wheat, at 89 cents in December of 1935, rose to $1.50 bushel by July of 1937. That year the Canadian Wheat Board made a profit for the government of $3 million. The year before they lost $11 million.

In 1938 the Wheat Board lost $61 million. The initial price had been set at 80 cents while the average price for the year was $1.31. But the good old days weren't back. The price dropped down again to 60 cents a bushel.

The Canadian west, geared to produce wheat at three times the domestic requirements, was once again caught in a world where overseas demand slackened. Some blamed the United States for the wheat glut. They had increased their acreage too much. Others said the Saskatchewan farm debt at $546 million or $18 per acre of cropland, was too much for the current price of grain. Solutions offered included deliveries of wheat only on a farm quota basis, shifting from wheat growing to ranching, defaulting on the prairie provinces' debts.

An economic committee of 300 economists from all over the world met in Quebec to study the problem. They decided that agriculture everywhere was the Cinderella of the economic family - the kitchen maid, the hewer of wood, the drawer of water, receiving an allowance from the family income which barely reaches a subsistence level. The economist said it was the inevitable results of the free play of economic forces in the agricultural world when there is all kinds of organized resistance from the forces of organized society.

In 1932, based on 30 cents a bushel for wheat, a farmer had to raise 16 bushels of wheat just to buy a loaf of bread, 10 bushels for a pack of gum, 150 for a dance ticket, 70 for a haircut, 20 for a glass of beer, 100 for a pound of coffee, 40 for a pound of beef steak and 8400 to pay the interest on a $6000 mortgage.
Only a war, WWII, changed the equations.
   

The War Years

Throughout history food, especially bread, has been a decisive weapon in war, and so it was in 1939. Western grain production increased dramatically with the German army over running Europe. British imports of meat, dairy and poultry from Denmark and Scandinavia ceased. Canadian bacon was sent instead.

Canada's gift of wheat and flour to Greece saved over 1 million lives. When the Australian crop failed, Canadian wheat was shipped to India. US wheat was diverted for the production of alcohol for munitions and making synthetic rubber. As Allied armies invaded France in June of 1944, nation after nation became liberated and the demand for wheat increased. Canada's piled up reserves of precious food came to the rescue.

In 1941 the Canadian federal government started to pay for the cost of moving feed grains from the lake head to eastern provinces and from Calgary and Edmonton to British Columbia. The eastern farmers couldn't produce feed grains to feed all their livestock, same with the farmers in B.C. The freight assistance policy, a war time measure to keep down the costs of meats, dairy and poultry products in the east and B.C., remained in place years after the war. The price of wheat paid to Alberta farmers rose slowly but steadily under price controls -56 cents a bushel in 1940, 74 cents in 1942, $1.23 in 1944 and $1.55 in 1945. Production of all kinds of food increased during the war years. Alberta farmers produced 10 million hogs for the war effort.

Canadian farm production increased by 40% during the war but farmers were worried that after the war they would be back to poverty. The older men on the land had bitter memories of 1920 when the prices dropped with peace.
The Agricultural Price Support Board was set up by the federal government with $200 million capital. Canada's Prime Minister, Mackenzie King said that since farmers accepted price controls during the war they are entitled to a floor underneath prices after the war. While wheat was not included under the Price Support Board, the government did guarantee it would remain at $1.00 a bushel until 1950.
Great Britain took a major part of the wheat. The country was virtually bankrupt. England's six years of war cost the nation $130 billion. She ended the war with an external debt of $12 billion. For a century the British had invested their savings overseas. But in the Second World War sold almost all they had and incurred overseas debt double the amount of the previous investments. We are broke, said British Minister of Labour Ernest Bevan. We have spent everything we have had and I'm glad we did.

Supporters of the open market system of grain selling insist that western farmers lost millions subsidizing the British after the war, but the war devastated nations had no money to buy wheat. Because the farmers in the west were not greedy during a period of calamity it was thought they earned the right to favourable treatment when the wheat markets were glutted. So too were Canadian consumers subsidized by government enforced lower prices during and after the war.
The Canadian wheat market has continued much the same philosophy from that time on. A mixture of private enterprise and government pay outs, the Wheat Board each year sets an initial payment, which is made to the farmer when he delivers his grain, from that the freight rates and grain handling is deducted. Every producer gets the same price less the differences in freight.

As the grain is sold and the cash accumulated by the Board an interim payment is made to the farmers, usually in the spring. A second interim payment, when warranted, is made later in the year, followed by the final payment when the grain of that year's crop is finally disposed of. When there is large carry overs of grain and limited space in country and terminal elevators the Board operates a quota system of deliveries. Its purpose is to allow each producer to have an equitable share of the available outer space. The alternative would be a race to the shipping points at harvest times and those closest to the elevators or those harvested earliest would win. Before harvest each producer obtains a delivery permit book from the Board through the local elevator agent.

The amount of grain produced in western Canada has continued to increase, but so to has the fight for customers. Nothing new is today's fight at GATT and complaints that the Europeans are subsidizing their farmers and the Americans are competing unfairly. That was the big problem in the 1950s.

The US guaranteed its wheat producers $2.00 a bushel while Canadian farmers got $1.40. To get rid of their extra wheat the US used currency sales, credit and barter. Then as now the complaint was the US farmers were heavily subsidized and the Canadian farmers modestly so.

Nationalistic policies in Europe are nothing new. In the 1960s high domestic price for wheat in European countries was also used to encourage home wheat production and reduce imports. British wheat was $1.97, the same time the West Germans paid $2.85 to their wheat growers. Swiss farmers received $4.00 a bushel.
Do things ever change? Not in the grain market.

The Alberta Wheat Pool slowly paid off its debts and repaid those farmers who had originally contributed cash to build the elevators. Patronage dividends were paid to members who had delivered grain to the facilities and generations of new farmers have bought into the system.

The Alberta Wheat Pool, a farmer co-operative.
   
 

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