The Canadian Wheat Board has expanded its ownership stake in Canada’s grain transportation system.
The grain marketing agency, which already owns 3,400 rail cars, last week invested $65 million to buy two vessels to haul grain through the Great Lakes-St. Lawrence Seaway system.
Critics of the purchase said the board’s mandate does not allow it to own assets, but CWB chair Allen Oberg said that is not so.
“We’re confident we’re not in conflict with the CWB Act,” Oberg told a news conference announcing the purchase.
Read Also
Canola oil transloading facility opens
DP World just opened its new canola oil transload facility at the Port of Vancouver. It can ship one million tonnes of the commodity per year.
Under the deal announced Feb. 8, the board will spend $65 million to buy two new lakers, part of a group of eight ordered by shipping companies Algoma Central Corp. and Upper Lakes Group Inc.
A number of farm groups, along with CWB minister Gerry Ritz, criticized the purchase.
“The wheat board should focus on getting higher returns for farmers, not buying a bunch of ships,” Ritz said in a Feb. 9 e-mail.
Ritz said the decision puts $65 million of farmers’ money at risk and will hurt pool returns.
“Farmers have not been consulted on this and their money should not be spent recklessly.”
Oberg rejected Ritz’s description, saying the purchase will boost producers’ grain revenues in the future.
As for the charge by a number of groups that the board acted without consulting farmers, Oberg said the decision was made by the farmer-elected board of directors, which is a form of consultation.
“Farmers elect the board of directors to make decisions like this on their behalf.”
The Western Canadian Wheat Growers Association, a wheat board critic, said it strongly opposes the CWB’s decision to “commandeer” money owed to farmers to enter the ship business.
President Kevin Bender said the money spent on the purchase should remain in the hands of producers to invest as they see fit, whether it be their own farms, families, local business initiatives or other stocks or funds.
“Farmers on the verge of retirement, needing the money or wanting to invest elsewhere, should not be compelled to buy ships,” he said.
The federal government should allow farmers to opt out of any capital purchase made by the board, he added.
Barry Prentice of the University of Manitoba’s Transport Institute said the key to the investment’s success could be whether the vessels are able to secure return traffic back up the lakes, carrying products such as iron ore and pellets.
He said the board’s move might be designed in part to ensure competition with the railways for grain movement, which may provide benefits to farmers.
“At worst, the ships can be sold and most of the capital recovered.”
He said such ships are mobile assets with worldwide demand.
The two lakers, which will have a lifespan of at least 25 years, will be owned 100 percent by the CWB.
The vessels, being built in China, are each capable of carrying 30,000 tonnes of grain, and will be ready for service in 2013.
The ships have greater capacity than the 25,000 tonnes of existing lakers, are faster, consume less fuel and are more environmentally friendly.
Ward Weisensel, chief operating officer for the board, said Seaway Marine Transport will handle day-to- day operating costs and management of the two new vessels.
SMT, a vessel marketing and management company, operates the largest fleet of Canadian registered dry bulk carriers in the Great Lakes- Seaway system and eastern Canadian waters.
It is a partner of Algoma Central Corp. and Upper Lakes Shipping Inc.
Weisensel said the board pays $70 to $75 million a year to ship grain through the Lakes-Seaway system.
“As a major user, we decided if we’re going to continue to pay costs of shipping grain, it makes sense to take an ownership position if a viable business plan could be developed,” Weisensel said.
The board expects to ship more through the eastern system in the future, he added.
Oberg said the new vessels will provide farmers with pool revenue of $10 million a year, net of operating costs.
The $65 million construction cost will be spread over four crop years, which works out to about $1 per tonne.
Here’s what other farm groups had to say about the purchase:
Grain Growers of Canada president Stephen Vandervalk said it’s clearly beyond the board’s mandate, which is to return all revenue from grain sales to farmers. He echoed Bender’s comment that individual farmers might have other ways they would like to invest their share of the $65 million and criticized the lack of consultation.
National Farmers Union president Terry Boehm said $65 million is not that much in the context of the total value of CWB grain marketing and transportation. Given the lifespan of lakers, the investment will continue to pay dividends for years, he added.
“If this facilitates faster, more efficient transport of grain, that’s great.”
The Western Barley Growers Association criticized the lack of a public consultation process, saying investing in ships is outside the board’s mandate.
President Brian Otto said individual farmers should be given the opportunity to opt out of the deal.
He also said the board could have leased vessels rather than buy them.
