Rick Pender says it’s time farmers stopped grumbling about low commodity prices and took matters into their own hands.
He said he has figured out how producers can raise their incomes without relying on government bailouts.
It is a matter of convincing producers that his plan for jacking up the value of wheat has merit, he said.
That could be a tough sell because critics are already punching holes in his strategy, which includes the possibility of one day acquiring Sask-atchewan Wheat Pool.
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Pender’s idea is to establish a marketing cartel among producers in the five major wheat exporting areas – Canada, the United States, the European Union, Australia and Argentina.
The plan is to create a global wheat marketing agency that controls wheat prices the way the Organization of Petroleum Exporting Countries controls oil prices.
He wants to entice a block of producers in each of the five exporting regions to sign legally binding contracts with his new company, Farm Cor-10-P. Marketing International Ltd. The contracts will sell for $100.
The first part of the two-part contract would give Farm Cor-10-P. the right to negotiate higher wheat prices on behalf of the producers who sign it. Acting as a global wheat marketing agency, Farm Cor-10-P. would initiate meetings with wheat boards, governments, grain traders, grain companies and end users around the world.
If the company was unable to secure the floor price it was seeking, it would activate the second part of the contract, which requires a vote on a program to hold back inventory.
That’s where contract holders would individually decide whether they were willing to keep a portion of their wheat inventory in storage for up to 11 months.
If enough producers voted yes, Pender is convinced Farm Cor-10-P. would have the bargaining power to achieve the targeted wheat price.
Farm accountant Allyn Tastad has had a quick look at Pender’s plan. He said it is speculative and that Pender is playing on most farmers’ fondness for the word cartel.
“In my mind the solution is not this simple. If ConAgra, Cargill and ADM cannot implement a cartel, then I do not believe that Mr. Pender and his group will succeed.”
Pender said the multinationals haven’t created a cartel because they wouldn’t benefit from it.
“The grain companies make money on margins on grain rather than on the absolute price of grain.”
Pender is a fourth generation grain and pedigreed seed farmer from Meath Park, Sask. He is also president of Medicine Hat Inn Ltd., a 32-room hotel in Medicine Hat, Alta.
He is trying to raise a minimum of $150,000 to fund the first phase of the Farm Cor-10-P. project by holding investment meetings throughout Saskatchewan. The deadline for raising the money is Jan. 6, 2001. About half has been raised already.
The class A voting shares in this first offering are selling for $2.50 a share. A minimum investment of $500 is required. A total of 250,000 class A shares are available – 80,000 for Western Canada and 170,000 set aside for international investors.
The Saskatchewan Securities Commission limits who can invest in this type of an offering.
Investors (aside from Pender’s family and Farm Cor-10-P. officials) must either have received professional investment advice or have a substantial net worth and annual income.
The commission does not guarantee the securities sold through the offering and advises people to seek professional advice before committing any money to the project.
Tastad’s advice would be to walk away.
“They aren’t going to get my money,” said the partner at the Saskatoon firm Hounjet Tastad.
“We want to believe that there is a pot of gold and things will work out,” he said.
“It’s just not all that simple, unfortunately.”
University of Saskatchewan college of commerce professor Marv Painter said there’s “no chance” he would invest in a company whose profits depend on raising commodity prices through a global marketing cartel.
“Good luck. You’re competing against the world. Boy, you’d better be awfully big.”
He said the idea of Pender’s farmer- controlled company taking over Saskatchewan Wheat Pool is absurd and he suggested Pender is playing the pool card to convince farmers who are disenchanted with the grain company to invest in Farm Cor-10-P.
But Pender said it’s that lack of vision that has put farmers in the boat they’re in.
“At the end of the year let’s see how many contracts we have. If we’re sitting at a couple hundred thousand contracts in five regions of the world, I doubt anybody is going to say it’s pie in the sky anymore.”
He said buying Sask Pool isn’t part of Farm Corp.’s formal business plan. It was only mentioned in the promotional material to get farmers thinking about the possibilities of investing in a global marketing company.
If the initial share offering meets the $150,000 goal, the company will move into the second phase, which is to promote the project offshore. This requires raising $850,000 through the sale of 21,000 grain contracts.
