After a year of tossing wet noodles at the Canadian Wheat Board for cooking its pasta plant plans, Prairie Pasta Producers is discovering things aren’t as bad as they seemed.
The group has repeatedly complained that the board’s new generation co-op policy doesn’t give Prairie Pasta the freedom it needs and will prevent farmer-investors from committing money to the proposed pasta plant and mill.
But Prairie Pasta chair David Schnell admits that doesn’t appear to be the case.
“We’re really impressed with the response we’re getting from people.”
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Schnell is referring to the group’s escrow drive, which concluded April 4.
Meetings were conducted in 31 communities in Saskatchewan, Manitoba, Montana and North Dakota. The turnout was small, ranging from 10 to 60 people per meeting, but Schnell said the response from those who attended the two-hour sessions was “fantastic.”
He doesn’t have a bead on exactly how much money has been raised through the escrow drive because farmers have until April 15 to invest, but preliminary commitments have topped the $1 million mark.
The minimum individual commitment required is $5,000, or 2,500 bushels of durum. The maximum is $50,000, or 25,000 bushels.
The group needs to raise $5 million through this escrow drive to continue with the project.
“I feel there will be no problem raising that minimum.”
The money raised from the drive will be placed in trust with the Estevan Credit Union in Estevan, Sask. Prairie Pasta will use the interest generated from the escrow funds to complete its business plan and prospectus.
Once a specific investment opportunity is identified, members will be asked whether they want to invest their escrow funds in the project or have their money returned.
Schnell said possible investments will run the gamut from building a pasta plant and mill from scratch to buying or leasing existing facilities.
But a news release from one of the founding members indicates the group has given up on building its own facilities.
“We know from our feasibility study that the pasta industry already has excess production capacity,” said Harlan Johnson, who lives in Crosby, N.D.
“We are looking to buy market share rather than build a new plant.”
If that is the case, the odds are that the facilities will be purchased in the United States rather than Canada. According to figures provided by the wheat board, there are only two durum mills and three pasta plants in Western Canada compared to 24 durum mills and 156 pasta plants south of the border.
An alliance or joint venture is another possibility. Prairie Pasta is holding discussions with Dakota Growers Pasta Co., a U.S. new generation co-op that sold $120 million of pasta in 1998.
Schnell said Prairie Pasta is exploring the idea of a strategic alliance with Dakota Growers.
“Wouldn’t it make sense for us to form an alliance with another group of farmers?”
Dakota Growers would have access to more high quality durum and Prairie Pasta would be able to access some of the markets developed by its U.S. counterpart since it was formed in 1993, said Schnell.
