Another prairie grain industry stalwart and Winnipeg icon has fallen to an outside acquirer.
But even though ICE is moving into the prairie grain futures business, farmers don’t appear to be getting chilled.
“I don’t think it really matters,” said Newdale, Man., farmer Bruce Dalgarno about the proposed Intercontinental Exchange (ICE) buyout of the Winnipeg Commodity Exchange.
“If they’re going to keep it in Winnipeg and keep the contracts going, I don’t see that it matters who exactly owns it.”
Some say the takeover will probably expand and improve the exchange.
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The ICE offer for the WCE, which its board of directors has approved but shareholders have not yet voted upon, will take a few months to complete if approved. It could be through the regulatory process by mid-September, said WCE chief executive officer Mike Gagne.
ICE said it intends to keep the exchange based in Winnipeg. Gagne said he does not expect to see layoffs because of the takeover, and ICE said it will maintain the staff in Winnipeg.
The exchange offers futures contracts for canola, barley and feed wheat. While the barley and feed wheat contracts are lightly traded and local in nature, the canola contract gives prairie and foreign farmers, commercial users and speculators an accurate world price for the commodity in Canadian dollar terms. It is one of the world’s key canola price discovery mechanisms.
The WCE’s contracts allow prairie farmers to hedge their price risk with these commodities, effectively locking in prices for crops they have stored or are growing or plan to grow.
At one time the exchange offered contracts on other prairie farm commodities such as oats and flax, but in recent years those contracts have been discontinued because of lack of use.
Gagne said the takeover by ICE might mean it is easier to launch new contracts, because the WCE has been relatively small and poor.
“That’s one of the advantages of being part of a larger organization,” said Gagne.
“There is a fair amount of work and cost in developing and launching new contracts and I think an organization like ICE would facilitate that.”
The prospective new owner has said that it is interested in expanding the WCE.
ICE chair and chief executive officer Jeffrey Sprecher said in the takeover announcement that “the addition of Winnipeg’s markets further enhances our agricultural product offering.”
“This franchise brings to ICE a Canadian-based regulated futures exchange and clearinghouse from which we can develop additional derivative trading and clearing opportunities on the Canadian markets which are rich in natural resources,” said Sprecher.
ICE is an Atlanta-based company that came from nowhere a few years ago to become a major player in the fast-evolving world of commodity exchanges. Last year ICE bought the New York Board of Trade, which is famous for its sugar, coffee, cocoa and frozen concentrated orange juice contracts. ICE owns a number of other exchanges and has a major presence in energy futures markets.
If the deal is approved by WCE shareholders, ICE will buy the exchange for $40 million.
The WCE was founded in 1887 as the Winnipeg Grain and Produce Exchange, where direct sales were made. It evolved later into a futures exchange.
Its roiling trading pits and raucous traders were hallmarks of Winnipeg and sometimes infamous symbols in prairie farmers’ consciousness.
Some farmers and farm groups demonized the Winnipeg grain pits as modern day equivalents of the fleshpots of Babylon, in which speculators grew rich off commodities that did not offer a decent living to the farmers who grew them.
Others have championed the exchange as an emblem of native-born prairie capitalism.
Without question it has been a key component of the Winnipeg-based Canadian grain industry, and because it occurred in the same month as the Saskatchewan Wheat Pool takeover of Agricore United, it has elicited some worries about the “hollowing out” that is haunting many Canadian industries.
Dalgarno admitted that even though the takeover probably won’t hurt and might even help farmers’ hedging needs, he feels a bit uncomfortable with the foreign takeover of a prairie icon.
“As a Canadian, I kind of hate to see it go to an American company, and it would be nice to keep Canadian stuff owned by Canadians, but that’s how it goes, I guess,” said Dalgarno.
