CWB wants to privatize sooner rather than later

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The CWB is talking to potential partners about taking the government-owned grain company private sooner than later.

“We’ve been talking to people already in the grain industry, and people who are not and want to invest in it,” Gord Flaten, the CWB’s vice-president for grain procurement, told reporters Jan. 16.

“That involves either positioning ourselves as an independent company, sell it to some other investors, or to look at other options including some level of farmer involvement.”

Flaten declined to identify the companies and individuals.

Legislation ending the Canadian Wheat Board’s monopoly requires the CWB to become a private company by 2017 and submit the plan for doing so to the agriculture minister by 2016, or the government will wind down the CWB.

“There are a lot of companies that either want to expand their (grain)-origination capacity or don’t have origination capacity at all in Western Canada and that is one of the things that we bring into that environment,” Flaten said. “We’ve got that relationship with farmers and with the companies and a fair amount of knowledge of how the system works and where the opportunities are and so that makes us an attractive partner to quite a few potential investors. There’s also a lot of demand to invest in the grain industry so the timing for that might work out well.”

The CWB is looking at corporate models. Options include private ownership, a publicly traded shareholder-owned firm and a co-operative.

“We are not restricting it to any one kind of model,” he said. “I think it is clear there is a role for farmers somehow. How that happens I think will be up to farmers and the potential investors, some of whom may be farmers and we’re going to facilitate that discussion.”

Owning facilities

During his formal address, Flaten said the CWB is looking to build its own grain-handling facilities. Currently it has handling agreements with most grain companies.

The CWB will also earn money leasing out its two lake vessels that expected to be sailing in 2014.

It also owns 3,400 rail cars leased to the railways, and its office building in downtown Winnipeg, which has recently been advertised for sale.

Flaten said the CWB is getting $150 million to $200 million from the old wheat board’s contingency fund. The money was earned from futures hedging and cash trading and was meant to offset losses that sometimes occur in those areas.

Many farmers argued that money belongs to them because it was earned when farmers marketing through the board covered all the board’s operating costs.

The CWB, which cut staff to 100 from 400 after losing its single-desk marketing authority, has a clean balance sheet thanks to $350 million from Ottawa to cover transition costs, Flaten said.

Producer cars

“Producer cars, I would say, are working better than we expected in the open market…” Flaten said. “That is something we expect to be a pretty big portion of our program.”

This crop year 4,460 producer cars have been authorized, down 25 per cent from the same period last year, a Canadian Grain Commission official said later.

Of the record 14,951 producer cars shipped in 2011-12, all but 919 were loaded with wheat board grains.

Most observers predicted producer car use would decline without the CWB monopoly because grain companies with terminals usually have little economic incentive to accept cars from other shippers.

“Because we’ve been able to negotiate terminal access and we’ve got some good logistical relationships working between us and those terminals we’ve been able to facilitate producer cars,” Flaten said.

A few hundred farmers this crop year have taken advantage of the CWB’s “Act of God” clause to get out of sales contracts after hail or other disaster wiped out or downgraded their crops, Flaten said.

Several thousand farmers have also been able to make grade changes to their contracts without penalty.

“The feedback we’ve been getting is they really appreciate the flexibility,” he said. “They don’t have that on every other contract.”

The key is for farmers to inform the CWB early about grade changes, Flaten added. Because the CWB is selling large volumes throughout the year it can usually accommodate it.

“We’re not going to charge a cost (to farmers) for something that doesn’t cost the pool any money,” Flaten said.

In addition to its pools, the CWB is buying and selling cash grain. Sometimes the CWB buys grain from other companies at port and resells it, Flaten said.

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