Farmer equity | The date of privatization is not set but must be complete before August 2017
A CWB plan that offers prairie farmers equity in a privatized grain company will likely remain in effect for the 2014-15 crop year.
However, the terms of the equity offering are subject to change after Aug. 1, 2014.
Under the privatization plan, farmers will be offered $5 worth of post-privatization CWB equity for each tonne of grain they deliver to the company this year.
Other details, including a proposed date of privatization, potential corporate partners and the form that farmer equity will take, are still being worked out.
Read Also
Canada’s plant hardiness zones receive update
The latest update to Canada’s plant hardiness zones and plant hardiness maps was released this summer.
The privatization date is still up in the air, but CWB officials hope to have the plan executed before a government imposed August 2017 deadline.
“We’re trying to come up with a plan … where farmers have a permanent shareholding in the CWB,” said company president Ian White during an Oct. 17 conference call.
CWB’s plan to establish a network of grain handling assets across the West will require outside capital, he added.
When asked how producers could be assured that their equity in a privatized CWB would not be eroded as it was in the former Saskatchewan Wheat Pool, White said CWB’s ownership model will differ from the one employed by the prairie pools.
“When we look at the sorts of things that we think are going to be necessary for the CWB to develop — the sort of network that’s required and the capital that’s required — we do expect to have some outside, very much aligned shareholders that aren’t necessarily associated with the stock markets,” White said.
“We’re looking to develop a structure that tries to keep the farmers’ shareholdings as intact as possible…. We don’t believe that the sort of model that was set up with the prairie pools years ago was necessarily a very sustainable model.… We’re looking for something that will be more sustainable as we move forward and protect farmers interests.”
The amount of post-privatization equity held by farmers will depend on the amount of grain marketed through CWB and the estimated value of the company once it is privatized.
In the first year of grain market deregulation, CWB officials suggested that the company was aiming to handle one-third of the wheat and barley produced in Western Canada, or 10 million tonnes.
It has since acknowledged that the amount of grain committed to CWB programs in 2012-13 fell short of that amount.
Some industry observers have estimated that it was closer to 10 percent.
CWB has since expanded its sales program to include peas, canola and other crops, but the company’s expected market share is unclear.
Total production of barley and wheat in Western Canada, including durum, is expected to come in at 40 million tonnes in 2013-14.
If CWB pool programs attract 10 percent of that volume, farmer equity derived from the sale of those two grains would amount to $20 million this year.
Dayna Spiring, CWB’s chief strategy officer and general counsel, said farmer response will determine how much equity is held by producers.
“We’re still finalizing our plans for the future, but we anticipate that farmers will own a minority interest in the CWB as we go forward,” Spiring said.
“How long the equity offering will be available to farmers depends in large part on farmers’ response to this program.… We anticipate that (the equity offering) will be a multi-year plan. It will certainly be for longer than this year. The equity value that will be attributed to farmers every year will vary, but for this year it’s $5 per tonne for each tonne a farmer delivers.”
Some farmers have criticized the equity plan, suggesting it offers producers equity in something that they already own.
However, Spiring said CWB assets were built up over a long period and were debt financed through CWB’s retained earnings rather than from money generated through CWB pool accounts.
“While there has been various investments made, those investments haven’t been made out of the pool accounts,” she said.
“There have been investments that have been financed, and there’s been money that has been borrowed to pay for those investments. So … no, farmers don’t yet own the CWB, but we want them to be owners of the CWB, and that’s our plan. We value farmers. We want them to be our partners and we do want them to play a meaningful role in our future.”
