A private wheat board could work
The universe is unfolding as it should at the old Canadian Wheat Board, but the federal government isn’t doing a very good job explaining it.
When the Harper government ended the board’s monopoly on the sale of western-Canadian wheat and barley in 2012 amid much anger and resistance, it set up in its place an interim organization with a plan to privatize or dissolve it before 2017.
It would either survive as a viable grain-marketing company, or face an ignoble demise.
The possible privatization of CWB, as the new entity is now known, has raised questions about the fair disposition of assets, which include a building on Main Street in Winnipeg, as well as grain elevators, rail cars and ships. Ottawa also provided the new group with $350 million to help with transition costs.
A court has ruled CWB’s assets do not belong to the farmers who did business through the board and funded its operations, but a group loyal to the old organization wants to appeal that judgment to the Supreme Court of Canada.
The government’s strategic goal, according to grain analysts, is to give farmers more choice by boosting competition in the grain-marketing industry in Western Canada, which would undoubtedly be a good thing. The more buyers the better.
The new entity has only just begun the process of transforming itself into a private-sector grain-trading company, but it needs a partner to gain expertise, new markets and capital.
For obvious reasons, the government would prefer to sell to a company that is not active in western Canada today. Selling to an existing player would hardly increase competition.
The idea is sound, although the execution has left some critics a little nervous.
A Saskatchewan group called Farmers of North America says it has raised about $50 million towards the estimated sale price of about $300 million. The government rejected the overture without explanation, but Ottawa apparently doesn’t think it would add to the competitive environment in the region.
Speculation has since emerged that the preferred buyer is Archer Daniels Midland Company, a multi-billion-dollar Chicago-based food-processing conglomerate that currently has very little presence as a grain marketer in western Canada.
Critics, including Winnipeg NDP MP Pat Martin, say they are puzzled that all the money from the sale will remain with the CWB and its new owner, instead of the government or even farmers.
The government’s intent, however, is to help recapitalize the CWB, which has invested heavily in recent years in grain-handling infrastructure.
The book value of the CWB is unknown because the government refuses to release its financial statements for reasons of commercial confidentiality, but most of its assets are probably highly leveraged.
The government should disclose more information if a sale is ever achieved. It needs only to look at how the sale of Petro-Canada was handled as an example of complete transparency.
Federal legislation requires the new owner to give farmers an equity interest in the CWB, based on the volume of grain delivered. Any farmer who delivers grain against a CWB contract since 2013-14 is eligible to participate. And it won’t cost farmers anything to participate. CWB will continue to buy and sell their grain at market prices.
Agriculture Minister Gerry Ritz may have the best interests of farmers in mind in promoting competition, but he needs to provide a few more kernels of information so everyone can be comfortable with the outcome.
As usual, the Harper government suffers from its abysmal performance as a communicator.