The Canadian Wheat Board has stepped out of its usual business parameter to buy two ships to carry grain and other cargo on the Great Lakes-St. Lawrence Seaway.
The CWB called the deal historic. Not only is it the first step into ship ownership, it is also historic because it broadens the definition of the CWB mandate to maximize financial return to farmers.
With this deal, it is clear the CWB’s board of directors interprets this to mean not only maximizing returns from grain marketing but also investing in assets that can turn a profit.
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The board argues that its experience owning lakers will be much the same as its long experience owning rail hopper cars. It says the hopper cars have been a sound investment that has paid for itself many times over.
Financially that might be the case, but the initial motivation for buying rail cars was much different. Thirty years ago, the rail fleet was old and falling apart and the railways said grain transportation regulation made it unprofitable to invest in new cars. The lack of modern hopper cars was costing huge amounts in lost grain sales.
To address the critical problem, the federal government, Alberta, Saskatchewan and the CWB all bought rail cars.
However, the CWB’s purchase of 2,000 cars in 1978-79 met a lot of the same criticism that the ship deal is encountering today:
• the matter should have been discussed with farmers;
• farmers near retirement may not benefit from the deal;
• it would be better to lease than to own.
Like the rail cars, today’s laker fleet is old and worn out, but with the recent legislative change that allows the ships to be built overseas, it appears profitable to buy replacement ships. Indeed, the CWB’s lakers are part of a larger order that also includes six ships to be owned by Algoma Central Corp. and Upper Lakes Group.
So the CWB is not acting out of necessity, but to capture a potential profit.
It says the ships will cost $65 million to be paid over four years with money from selling farmers’ grain. It estimates net revenue will be at least $10 million per year, so they will pay for themselves within seven years of entering service.
Producers who see the CWB as their farm’s marketing agency likely view the deal favourably, as the CWB’s board does, as a way to move up the marketing chain to reap potential profits.
Those who see the CWB as a government monopoly through which they are forced to sell their wheat and barley likely view the deal negatively. They believe they are in the best position to decide where to invest money made from the sale of their grain.
This deal to buy lakers shows the importance of the makeup of the CWB board of directors. It is the gatekeeper that approves or rejects such proposals.
The issue should have been raised in last fall’s director elections in the odd numbered districts.
Perhaps commercial considerations would have restricted detailed discussion of buying ships. But there could have been an examination of the meaning and scope of “maximizing financial returns for farmers.”
Even without that discussion, it was clear which candidates favoured an activist CWB and which ones believed the CWB’s scope should be narrowly defined.
Activist candidates won four of the five seats open. Elections judge not only the record of candidates, but also select the people who will address the unknown issues that will come up in the future.
Given the importance of the board of directors in setting CWB policy and direction, it was disappointing that only 41.3 percent of the ballots distributed last fall were returned. If more farmers had voted, it would send a clearer message about whether they want the CWB to pursue a more active line or stick to getting the best price for grain it markets.
Bruce Dyck, Terry Fries, Barb Glen and D’Arce McMillan collaborate in the writing of Western Producer editorials.
