Wheat merger criticized

By Jerry Hagstrom

DTN Political Correspondent

BISMARCK, N.D. (DTN)--A Wheat industry committee recently presented a third proposal for the consolidation of the nation's three major Wheat groups at a meeting of the board of U.S. Wheat Associates.

But critics of the proposal said they have reservations about consolidating the three, particularly in light of a financial scandal involving a grain group in North Dakota.

The consolidation plan would merge U.S. Wheat Associates, which markets Wheat overseas, the National Association of Wheat Growers, which lobbies on domestic issues and the Wheat Export Trade and Education Committee, which lobbies on trade issues.

USWAA has a budget of about $14 million a year, NAWG's annual budget is about $1.1 million and WETEC's is about $290,000. NAWG and WETEC have had fund-raising difficulties in recent years and the boards of the groups have had conflicts with U.S. Wheat over management and policy issues such as biotechnology.

The groups have been working on the merger since January 2002 so the industry could speak with "one voice," but have had a hard time reaching an agreement, particularly since the marketing function is so much larger than lobbying and because federal and state laws restrict the use of checkoff funds farmers pay on each bushel of grain sold.

The latest plan would establish one organization and one board and would "protect and enhance" funding for existing programs for a minimum of three years by providing 76 percent of the budget for the marketing programs, 16 percent for domestic lobbying and 4 percent for trade lobbying.

But those percentages would be board policies, not bylaws, which upsets some USWA board members who believe NAWG and WETEC leaders are trying to solve their budget problems by tapping the USWA's checkoff funds.

"We're trying to fix a problem," said Larry Lee, a Velva, N.D. farmer who is an outgoing member of the USWA board and the North Dakota Wheat Commission, speaking for the North Dakota commission. "I don't see U.S. Wheat being the broken part."

The groups have spent more than $300,000 on consultants and meetings exploring the merger, Lee said.

"I keep looking for merits that exceed the costs," he said.

Most of the money for merger exploration has come from USWA. Lee said $300,000 spent on merger talks has "wasted" about $1 million in marketing efforts. If the $300,000 had been spent on marketing, he said, the agriculture department would have contributed $2.40 for every dollar farmers pay through their checkoff programs.

"To make these (budget percentages) as board policy rather than bylaws is absurd," he said. "There are no guarantees and no focus. You end up with knee-jerk budgeting."

Lee said he is worried that if the groups proceed with this plan and spend more money on lobbying instead of marketing, farmers will ask state governments to send their money back, but he's more worried that farmers will sue to end the checkoffs as disgruntled pork and beef producers have.

"There's a small faction out there that wants to lobby," he said.

Lee said he and other North Dakota farmers have grown more concerned about accountability in the use of their checkoff money since Lance Hagen, the executive director of the North Dakota Grain Growers, a NAWG affiliate, said in April he embezzled $112,000 from the group to play the futures market.

The money has been paid back but North Dakota officials are still investigating whether to file criminal charges. The North Dakota Wheat Commission had been contributing the NDGG general budget, but announced last week it will give the group money only for special projects.

The embezzlement "points out the need for open accountability and cautious stewardship of how and where these funds are used," Lee said. "In essence we are dealing with public monies. I've always contended a membership organization can buy whisky and sometimes that may be legitimate. But you can't do this with public monies."

Alan Lee, a Berthold, N.D., farmer who is the outgoing chairman of USWA and will remain on the board as chairman of the USWA budget committee, said he agreed with Larry Lee, but spoke more diplomatically.

The consolidation proposal, he said, "needs some work yet."

But Lee said USWA bylaws require a two-thirds vote to dissolve the organization and 75 to 80 percent of board members should vote for the dissolution and merger if it is going to be successful.