Hey there, time traveller!
This article was published 25/4/2015 (732 days ago), so information in it may no longer be current.
It was no secret the federal government wanted the CWB off its books.
Moving western Canadian grain marketing to an open market was an election promise that came with politically incorrect baggage for the Harper government.
It wound up owning and propping up an itty-bitty grain company going head to navel with the private trade.
The sale announced April 15 offers clear benefits to its new owners, Bunge Canada, the majority stakeholder in the newly formed Global Grain Group (G3) that will own 50.1 per cent of CWB and the Saudi Agricultural Investment Co. (SALIC), a wholly owned subsidiary of the Saudi government.
Bunge, already a player in eastern export terminals and canola processing, gains a toehold in the Prairie grain-handling system and a source of wheat for its U.S. mills. The Saudis have deep pockets and a big appetite for imported cereals.
There might be advantages to farmers having another player in Prairie grain handling — if it can be competitive. But if there was robust opportunity in this marketplace, it didn’t need the government to make it happen.
The CWB is breaking into a mature industry known for razor-thin margins. Its current and planned grain-handling facilities will give it about four per cent of the total Prairie grain-handling capacity. Plus, all of this new company’s export-terminal capacity is in the east, putting it at a disadvantage in the larger market off the West Coast.
In order for it to gain enough market share to be viable, it must either invest heavily in new facilities or convince its competitors to rent out space in theirs.
That’s a bit like President’s Choice seeking space on Walmart shelves.
That brings us to the silent "partner" in this deal — the farmers’ equity trust. It is perhaps the most puzzling piece to this jigsaw puzzle.
Throughout the campaign to end the Canadian Wheat Board’s monopoly, farmers were repeatedly told they could expect a "strong and viable" voluntary board in its wake, and it would be run by farmers.
"Yes, they will elect their own board," Agriculture Minister Gerry Ritz told the House of Commons agriculture committee Nov. 2, 2011. "After the interim period, where we control it as a government, yes, they will elect their own board should they decide to do that.
"So once we’re past that interim, absolutely farmers will run it."
A bid by Saskatchewan-based Farmers of North America to buy the CWB late last year by raising farmer investments toward a wholly farmer-owned grain-handling and fertilizer business was rejected before it even got off the ground.
That raised speculation that in light of Prairie history, in which farmer-owned grain companies proved to be a real political pain, the government wanted no part of a well-funded farmer lobby.
The deal with Bunge and SALIC offers farmers the illusion of ownership in the form of a farmers’ equity trust that is a 49.9 per cent partner in the new company.
But when you own something, you can choose to keep it or dispose of it on your own terms.
That’s not the case here. Farmers who deliver to the new company will receive $5 per tonne in the form of equity. However, the company has the option of unilaterally buying out that trust in its entirety after seven years, or when the equity trust is fully allocated.
Based on the CWB’s current capacity and that of facilities under construction, a full allocation could take 36 years. Or, the CWB might not buy out the farmers at all. Their "equity" may not even have value.
Although the farmers’ trust will have one position on the CWB’s seven-member board, the CWB chooses who that person will be. There is no guarantee that representative will even be a farmer.
The only control farmers have in the future of this new CWB is whether they will deliver to it. That’s going to depend more on what it’s paying on the driveway than its equity offer.
Laura Rance is editor of the Manitoba Co-operator.
She can be reached at email@example.com.