And what he’s proposing to them at this meeting Thursday is a way of “allowing the profits from fertilizer to go back in your bank account.”

Most of these same farmers were on hand in October 2012, when Farmers of North America (FNA) went on the road to drum up interest in Project N, a plan to build a majority-farmer-owned fertilizer plant at Belle Plaine, Sask.

Many here raised their hands when asked if they’re investors in Project N.

Though no plants have been built to date, Project N is still in the works, according to Mann, FNA’s chief operating officer.

This spring, however, FNA is on the road to promote and raise money for Genesis Grain and Fertilizer — its business plan to build seven supercentre farm input distribution sites across Western Canada.

Once FNA has raised the minimum amount listed in its offering memorandum — $24.2 million — it plans to begin construction of the first supercentre, at Belle Plaine.

The Belle Plaine facility would have capacity for 50,000 tonnes of dry granular fertilizer, plus liquid fertilizer storage.

In the long run, FNA plans to construct Project N on that same Belle Plaine site, and supply all seven supercentres with its own nitrogen fertilizer.

Until then, Genesis will sell fertilizer sourced from around the world by AgraCity — a separate company owned by Barrie Mann’s brother and FNA president, James Mann, with another Mann brother, Jason.

AgraCity will also provide logistics and selling services for Genesis.

Farmers buying fertilizer at the supercentres would pay market prices; Genesis would pass profits on to investors. “We’re not out to break the price of fertilizer,” Mann told the Weyburn audience.

Investors can buy units in the Genesis projects for $1,000 each, with a minimum investment of $10,000. Investors must be farmers, Canadians and FNA members.

Qualifying investors will only be able to resell shares to other buyers who meet those qualifications.

FNA is a Saskatoon-based input buying group, today charging $1,200 for a three-year membership. Membership entitles farmers to access farm input buying opportunities offered by AgraCity.

“There’s a lot of games played in the fertilizer game,” Mann said.

By buying shares in Genesis and letting management know their fertilizer needs in advance, he said, farmers will profit. Some years, Genesis may be able to buy fertilizer at low prices, sell at higher market prices, then pass the difference back to investors.

Mann said he hopes farmers buy at least enough shares in Genesis to account for their own fertilizer use. Farmers, he estimated, should invest $10 per acre of land in the Genesis project to effectively hedge their needs.

“If your investment is much less, you’re just buying retail.”

When a Weyburn farmer asked why bigger companies would let a new, smaller facility come in and disrupt the market, Mann explained that Genesis would only, ultimately, make up a small share of the fertilizer market.

As such, “we’re not going out to bust the price of fertilizer. We’re not competing.”

— Leeann Minogue is editor of Grainews, based at Griffin, Sask. Follow her @GrainMuse on Twitter.

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Saskatoon-based FNA and its sister supply organization, AgraCity, said Thursday they now have teams on the ground in three states — North Dakota, Minnesota and South Dakota — to recruit new FNA members.

“When the organization began back in 1999, the name was chosen because we knew that the U.S. was part of the long-term plan,” FNA CEO James Mann said in a release.

In the U.S., where FNA is operating out of Kansas City, farmers are being offered three-year memberships at $2,500 each, the same fee Canadian farmers pay.

Expansion into the U.S. has “a lot of benefits” for both Canadian and U.S. farmers and current members, Mann said, as a broader membership has “the market power needed to balance the monopolistic forces that are capturing far too much of the value of farmers’ work.

Mann, who said his family has “homesteader roots” in both Canada and the U.S., added expansion of membership into the U.S. will “provide benefits for members in both countries that wouldn’t be possible otherwise.”

FNA, which provides crop inputs and other farm supplies to farmer members, has an exclusive supply deal with AgraCity — which already has a U.S. office set up in Fort Collins, Colorado — to procure and distribute fertilizers, crop protection, adjuvants, seed and petroleum products.

AgraCity has a “proven track record” of bringing new generic products to farmers and “generating savings in several farm input categories,” according to AgraCity’s U.S. country head, Jeff Novak, in the same release.

“From crop protection to oils and lubricants, American farmers will see products and pricing designed with the farm’s bottom line in mind,” he said.

James Webb, the chief operating officer for FNA USA, also described the company as “a proven model that will definitely benefit American farmers. It’s hard to argue with the kind of success we’ve had north of the border, tearing down glyphosate prices and launching an advanced project to build a nitrogen fertilizer plant.”

FNA in 2012 set up a partnership and began seeking farmer investment in a nitrogen fertilizer plant, which it announced this summer will be built at Belle Plaine in southern Saskatchewan.

FNA and AgraCity this fall also created a new Canadian organization, Genesis Grain and Fertilizer, with a stated plan to build a farmer-owned grain handling and fertilizer sales and distribution company.

To kick-start Genesis’ development, FNA made an offer in October to buy the handling assets of CWB, the former Canadian Wheat Board, but CWB rejected its proposal. FNA has since said it will soon resume its ongoing town-hall meetings with Prairie farmers on the Genesis business. — AGCanada.com Network

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Saskatoon-based FNA said Monday its proposal — which called for CWB’s assets to become part of an farmer-owned grain handling and fertilizer manufacturing and marketing organization dubbed Genesis Grain and Fertilizer — was “rejected by CWB management” in a phone call with FNA officials last week.

FNA and a sister company, AgraCity, earlier this month went to Ottawa urging officials with Agriculture and Agri-Food Canada and staff from Agriculture Minister Gerry Ritz’s office to spot them another six weeks to two months, in which farmers could “fully assess” their ability to invest in the Genesis proposal. [Related story]

However, FNA said Monday, “the deadline for raising capital passed before harvest was completed, denying farmers adequate time.”

As of Monday, FNA said it has received non-binding “expressions of interest” for $50 million from farmer-investors. Its proposal calls for share purchases at $1,000 per unit, with a minimum buy-in of 10 units.

Bob Friesen, FNA’s vice-president for government relations, reiterated Monday that FNA and AgraCity plan to build Genesis anyway, “but a successful acquisition of the CWB block of assets would have allowed us to hit the ground running.”

A spokesperson for Winnipeg-based CWB said Monday the company is not commenting on any specific proposals.

In an email late Monday, Ritz said CWB’s privatization “is not a political process.”

CWB, he said, “will assess all serious bidders and then submit a plan for commercialization to the government” as per the legislation under which the Wheat Board’s single marketing desk for Prairie wheat and barley was deregulated in 2012.

CWB, Ritz noted, is “increasing its capacity to remain a vibrant marketing option for farmers.”

“No assurance”

Farmers, Friesen said, are going to be paying for a farmer-owned grain firm and have indicated they want to be part of CWB’s acquisition. “Which part of this doesn’t CWB management get?”

FNA president James Mann, in Monday’s release, said CWB has essentially decided to reject an offer by farmers which “would have facilitated farmer delivery loyalty through deferred delivery commitments to ensure volume for financial sustainability.

“Then, when the dust settles after majority ownership acquisition by another company, potentially foreign, (CWB brass) will expect farmers to come back and deliver to the CWB anyway.”

However, he said, if farmers can’t take over CWB, “we believe (farmers) will build their own efficient, globally competitive business with the grain they own and the fertilizer they buy, as farmers have done in many competitor countries.”

Friesen also noted concern over the status of CWB’s own farmer equity plan, quoting CWB’s public disclosure documents as saying there can be “no assurance” of the value of any eligible producer’s stake in CWB, once the former Wheat Board is fully privatized as expected by 2017.

“It sounds like farmers shouldn’t depend on that having a lot of value,” he said.

FNA tentatively plans to resume its ongoing town-hall meetings with Prairie farmers on the Genesis proposal next month, Friesen said. — AGCanada.com Network

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FNA has created a new organization, Genesis Grain and Fertilizer LP, to build a farmer-owned grain handling and fertilizer sales and distribution company. As of Tuesday, it had received non-binding “expressions of interest” for $45 million from farmer-investors. [Related story]

FNA has been on the town-hall meeting circuit drumming up farmer support for the deal in recent weeks. Spokesperson Bob Friesen told reporters Thursday the organization has faced questions on why the company chose to roll out the plan during harvest.

While FNA was laying the groundwork for a farmer-owned grain company, he said, “we also suddenly realized that the privatization of the CWB was on an expedited timeline.”

The federal government’s plan calls for CWB to be fully privatized before August 2017 — but FNA officials cite a Winnipeg Free Press report last week which quotes CWB officials saying they’re working on a “much faster” privatization timeline than Ottawa’s expectation.

The same article by Free Press writer Martin Cash also cites “plenty of rumours” that major global grain handlers such as ADM and Louis Dreyfus are “close to making serious offers” on CWB.

FNA CEO James Mann told reporters that farmers need six weeks to two months to consider the company’s offering memorandum. Mann has been meeting with government officials in Ottawa to buy time.

Asked how talks have been going with federal government officials and CWB, Mann was hesitant to share details. But he said he was “very deeply concerned” that a decision would be made before farmers had time to consider the deal.

“I would say that I don’t have high hopes currently but we’re definitely doing everything we can to give farmers the time that they need to look at this,” Mann said.

Federal Agriculture Minister Gerry Ritz has been “strongly supportive of a farmer-owned CWB,” Mann added.

“There’s some issues of confidence whether farmers have the capacity or the will to invest. But if you don’t try, you will never know,” he said.

“Not to flip”

FNA put forth an offering memorandum on Oct. 10, hoping to entice farmer-investors to buy into the Genesis project. Under that offering, interested farmers can buy shares for $1,000 per unit, with a minimum buy-in of 10 units.

The offering, organized through Laurentian Bank Securities and in effect until Jan. 16, 2015, calls for a minimum total sale of 20,000 units up to a maximum of 380,000 units, for gross proceeds of $20 million to $380 million respectively.

Under the company’s proposed structure, farmer investors would hold most of Genesis’ class A shares. Genesis, in turn, would control a holding company, which in turn would own the proposed fertilizer company, and the proposed grain handling company, whether it’s CWB or not.

If Genesis’ play for CWB succeeds, FNA said it plans to continue rewarding farmers who deliver grain to the new organization with equity in CWB through a trust, which in turn would have a minority interest in CWB. CWB today pledges farmers $5 of equity per tonne.

“And we do have a provision in the offering memorandum, in the subscription agreement, that allows farmers to use grain inventory to secure their investment,” said Friesen.

The organization intends to build a grain handling system with or without the CWB. Farmer investors will be able to withdraw their money, or leave it in, if the bid to buy CWB fails.

FNA is also building a fertilizer plant near Belle Plaine, Sask. The organization hopes to tie together the grain handling and fertilizer distribution systems.

“It makes sense from an efficiency operation. And just as importantly, or more importantly, the efficiency of farmer capital, to be able to combine these ventures into a single operation entity at a single operating location,” Mann said.

The fertilizer project will go ahead regardless of the outcome of the CWB deal. Investors in the fertilizer project will not be obligated to invest in the grain handling project.

The federal government will not receive capital from CWB’s sale, Mann said. That money is to stay with the buyer, on the condition that it’s re-invested into CWB.

FNA has placed a $250 million valuation on CWB, based on the last available financials of 2012, said Derek Penner, chief financial officer of FNA’s sister organization, AgraCity. Penner told reporters it was difficult to give a good answer to questions on CWB’s current liabilities.

Mann said farmers have expressed concern that any infrastructure they build would be bought out by other companies down the road. To keep that from happening, FNA is selling shares to farmers only, Mann said. Shares can’t be bought by other entities down the road, he added.

“We’re not developing these projects to flip them,” Friesen said. “This is for the long-term benefit of the farmers that invest.”

A “farmer,” for the purpose of investing in Genesis, is anyone who’s ever filed an income tax return “reflecting farm income” — including retired farmers, Penner said — or any corporation controlled by one or more people who’ve ever filed such a tax return.

The proposal also allows for one or more “strategic investors” to buy separate minority interests in Genesis’ holding company, the proposed fertilizer business and a Genesis-controlled grain handler — again, whether it’s CWB or not.

No such investor has yet signed an agreement to buy into or help finance the project, FNA noted.

— Lisa Guenther is a field editor for Grainews at Livelong, Sask. Includes files from Dave Bedard of AGCanada.com.

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