The Canadian Wheat Board on Monday outlined six business requirements it says are critical to the success of any potential new organization that might be created if the current wheat-marketing structure is disbanded by the federal government.
The federal government intends to introduce legislation ending the CWB monopoly this week.
In a news release, Allen Oberg, chair of the CWB board of directors, said the organization, with the assistance of external business consultants KPMG, had analyzed “all possible alternatives for farmers” and had identified concrete requirements for any new entity to succeed.
“This information was shared with minister (Gerry) Ritz in July, but we continue to be stymied by the government’s inability to provide answers — despite its stated objective for a ‘strong and viable’ grain-marketing entity in an open market,” Oberg said in the release.
“While the minister attempts to paint CWB directors as being uncooperative, we have in fact been taking these issues very seriously, without any meaningful response from government regarding these basic requirements.
He urged the minister to broadly consult with farmers, including those who want to continue the single desk. He also said consultations about the new legislation – and associated business requirements – should involve federal standing committee hearings held in Western Canada.
The following are the CWB’s six recommendations:
Capital/equity
Government would need to contribute sufficient capital in the order of magnitude of $225 million, to finance grain inventories and conduct business operations. Under the circumstances and given the proposed timelines, it would not be possible for a new entity to raise equity from the private sector.
Financing/borrowing
Government would need to provide guarantees of borrowings by the new entity for a period of at least five years. In addition to a base level of equity, a new entity would require debt financing. It would not be possible for a new entity to access debt financing without government guarantees, given that any new entity would have no business track record to provide comfort to lenders.
Risk management
Government would need to provide a risk reserve in the order of magnitude of $200 million to replace its current guarantees of initial payments that are made to farmers (payments made before sales returns have been fully generated). A risk reserve would be necessary to enable a new entity to offer price pooling to farmers with initial payments that could attract sufficient grain deliveries.
Ownership structure
Government would need to act as the initial owners of a new entity with a share-capital structure. Under the circumstances, and in view of the short timeframes, a new entity would be unable to operate under any other ownership structure. An appropriate exit strategy would have to be put in place to enable the government to divest its shares in a new entity in due course.
Access to country and port grain terminals
Government would need to ensure regulated access to grain-handling facilities to ensure competitively priced access with service levels that would enable third parties to effectively compete.
Export access
Government would need to provide a new entity with regulatory authority to direct its own grain to port terminals of its choosing.
