Saskatchewan Wheat Pool officials have tersely rejected suggestions that farmers in the province need a new co-operative grain company.
That’s one reason cited by the two other prairie pools for their bid to take over United Grain Growers Ltd. and set up a new grain company in Saskatchewan based on traditional co-op principles.
“This will provide a co-operative alternative to the producers of Saskatchewan that they don’t have at the present time,” said Anders Bruun, corporate secretary of Manitoba Pool Elevators.
That, along with similar comments by Alberta Wheat Pool officials, clearly struck a nerve with officials at Sask Pool’s head office in Regina.
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Sask Pool president Leroy Larsen said he was “disturbed” by the statements, insisting the pool remains a farmer-controlled co-operative.
The head of Sask Pool’s grain group was even more blunt in his response.
“I guess I find the comment both off-base and offensive,” said Bruce Johnson. “Producers are the ones that have the voting shares, producers are the ones that elect the board of directors and the board of directors controls the organization. It makes no sense to us at all.”
However, Bruun said while Sask Pool has some level of accountability to its producer customers, “it is not a true co-op.”
The new company that would be set up in Saskatchewan if the takeover bid is successful would provide patronage dividend payments, real and effective democratic control and other traditional co-operative benefits, he said.
Now that UGG is up for grabs, some industry observers have wondered whether Sask Pool might make a play for control of the company in order to expand its grain collection system into Alberta and Manitoba.
Keeping an eye out
Larsen said Feb. 21 Sask Pool does not own any UGG shares, but he wouldn’t rule anything out in the future: “We’ll certainly be watching what unfolds through this bidding exercise and what might be happening.”
He said Sask Pool, which now has about 57 percent of the grain market in Saskatchewan, will continue to compete for farmers’ grain no matter who owns UGG.
“The situation in Saskatchewan will be the same. The only difference is we’ll be competing against our sister pools” if their takeover bid succeeds.
That had been happening recently anyway, he said, with Alberta Pool investing in an inland terminal in Dodsland, Sask., and Sask Pool’s subsidiary AgPro Grain buying grain in Manitoba.
Both those developments have caused tensions among the pools, as did Sask Pool’s decision to enter into a joint venture with Cargill Ltd. to build a new grain export terminal at Vancouver without involving the two other pools.
Larsen said he doesn’t see why the pools’ bid for UGG should affect joint ventures among the three pools, such as Xcan Grain Pool and Western Co-operative Fertilizers Ltd., or the longstanding farm policy alliance represented by Prairie Pools Inc. It is a sentiment echoed by spokespersons for the two other pools.
However the move does seem to have ended once and for all the idea that the pools might one day amalgamate into one big company.
Geoff Southwood, chief financial officer of Alberta Pool, said his company shared that vision until the decision by Sask Pool to go public.
“Clearly their philosophy had changed, their structure had changed,” he said. “They were no longer a co-operative, they were a shareholder owned corporation.”
Also, Sask Pool became more focused on diversification into value-added activities while the other pools concentrated more on the core business of buying grain and selling farm inputs.
“Our commonality of interest was drifting apart,” Southwood said.
Asked if Sask Pool would become more aggressive in buying grain in other provinces if the pools were to set up shop in Saskatchewan, Johnson said the company is always looking to improve its grain collection system.
“We have said in the past that we have to look to expand beyond our boundaries but there’s no firm plan in place that I can talk about.”
Johnson added it’s far too early to be making plans based on the assumption the pools will get control of UGG, particularly given early reaction from the market. The UGG share price quickly surpassed the pool’s $13.75 takeover bid.
“The market is indicating it feels the offer is probably not sufficient,” he said.
