When Brian Hayward was chief executive officer of Agricore United, his board would sometimes discuss the dismantling of the Canadian Wheat Board’s export monopoly.
Directors favoured a dual market for wheat and barley, but Hayward would issue a note of caution whenever the topic surfaced.
“I’ve said it more than once, be careful what you ask for because you may get it. The devil is in the details.”
Hayward said the same message holds true today in the wake of the Conservative government’s announcement that it intends to end the single desk in time for the start of the 2012-13 crop year.
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How the government handles the dismantling of the board’s monopoly will reverberate in the grain industry for years to come.
Hayward said in the past, he would explain to the Agricore United board that the monopoly is worth something and Ottawa would need to compensate the CWB if it was eliminated.
Agricore United and Saskatchewan Wheat Pool later merged to form Viterra.
Hayward said the wheat board would need assets to secure a line of credit from the bank to pay farmers for their grain and for margin calls when it hedged grain on futures markets.
“Does it get … a bag of money on Day 1 so it actually has some capital?” he said.
One of the hypothetical numbers tossed around at that time was a severance package worth $2 billion, enough money to seriously disrupt the dynamics of the western Canadian grain industry.
“What if they start building elevators and overbuilding elevators?” said Hayward.
Another scenario he would lay out in front of his board involved the CWB finding a partner, such as a Chinese grain company with deep pockets willing to invest hundreds of millions of dollars in building infrastructure.
It is those types of concerns that have Hayward and other grain industry executives and analysts preaching a measured, painstaking approach to the dismantling of the single desk.
“There’s just a ton of questions, and the implications for the private trade really depend on how the government proceeds,” said Hayward.
The demise of the single desk would evaporate the assumptions about grain handling margins and market share on which grain companies built their Canadian businesses.
It would also have a lasting impact on the wheat board, farmer-owned inland terminals, producer car loaders, short-line railways, national railways, port terminals and farmers.
“Steering a course through this quagmire is going to be very difficult. It’s a complicated business. It really is very complicated,” said Hayward.
“The government would be very well advised to think about this very carefully.”
