Equity for grain Farmers would receive $5 equity in the company for every tonne they sell
The former Canadian Wheat Board has taken its first steps toward privatization.
It has unveiled a two-pronged plan that includes establishing a network of grain handling facilities across Western Canada and promising prairie farmers an equity stake in the soon-to-be privatized company.
Gord Flaten, CWB’s vice-president of grain procurement, said farmers across Western Canada will receive $5 worth of equity in the privatized CWB for each tonne of grain they sell through CWB in the 2013-14 crop year.
The company did not say when privatization would occur or how the acquisition of grain handling facilities would be financed.
Details of the farmer equity plan were posted Sept. 13 on the CWB website.
“We are going to be announcing details of the grain handling network at a later date but right now, we’ve decided it’s important to inform farmers and our grain handling agents about the farmer ownership component so that when farmers are making their decisions about marketing this fall, this information will be available,” said Flaten.
The promise of farmer equity is subject to CWB receiving legal, regulatory and governmental approvals, but Flaten expects that will be no problem.
Acquiring a network of grain handling facilities is an ambitious and costly strategy that could require tens, if not hundreds of millions of dollars worth of investment capital.
Flaten said Sept. 20 that CWB has identified potential corporate partners that could help CWB transition from a government-backed marketing agency with no grain handling assets to a private-sector company with country elevators and an ownership structure that includes farmer equity.
He declined to identify companies that might be involved in the privatization, saying details will be announced as decisions are finalized.
The new company will be “Canadian focused” but Flaten did not rule out the possibility that CWB would partner with either an American-based company or a foreign multinational involved in grain handling.
“We do have a number of other interested parties who we’ve been talking with and who have approached us about potential partnerships,” Flaten said.
Flaten did not offer a timeline for reaching an agreement but said CWB officials are eager to have a deal negotiated, approved and executed in advance of a government imposed Aug. 2017 deadline.
So far, farmer response to the CWB’s equity plan has been muted, largely because information has been slow to emerge, but also because most of Western Canada’s grain farmers are still knee-deep in harvest operations.
Stephen Vandervalk, president of Grain Growers of Canada and Alberta vice-president with Western Canadian Wheat Growers, said he learned about the CWB equity plan via email.
“I saw it on an email that came across my phone while I was harvesting and … I haven’t had a chance to look at it since.”
Vandervalk said many farmers will likely be wondering why equity in CWB is only be offered on CWB sales made in 2013-14.
Vandervalk said some producers have already signed contracts to sell a significant portion of their 2013-14 crop to other companies.
Those farmers couldn’t take full advantage of the CWB equity offer even if they wanted to.
“I’m not sure why they are just picking one marketing year,” Vandervalk said.
“In my mind, they should look at sales over the last three or five or seven years and every farmer should get equity automatically based on those volumes.”
Another farmer who spoke with The Western Producer said the fact that CWB equity will only be offered to farmers who deal with the CWB in 2013-14 will leave a bitter taste in many growers’ mouths.
“My details are sketchy but it just struck me as being unfair,” said the Manitoba grain grower who spoke on the condition of anonymity.
“I’m glad the board is gone or that we’ve gone to a dual market but as pro-dual marketing as I was, I still felt that a lot of us got shafted with equity that we did have in the board,” he said.
Flaten said securities regulators would not allow the CWB to offer equity based on previous CWB sales.