Farmers of North America has a plan for a farmer-owned CWB
Farmers of North America (FNA) wants to help farmers get majority ownership of CWB, but neither organization is saying whether they’ve discussed the plan or if CWB supports it.
Saskatoon-headquartered FNA, which describes itself as “a business alliance of farmers dedicated to maximizing farm profitability,” outlines on its website a plan to create a farmer-owned grain-handling and -marketing company to take majority control of CWB and dovetail it with FNA’s ProjectN, a $1.76-billion plan for a farmer-owned firm to manufacture and distribute nitrogen fertilizer.
FNA says the synergies offer farmers a “once-in-a-lifetime opportunity,” but warns they must act quickly because CWB is fast tracking conversion from a government-owned grain company, which was created when the Canadian Wheat Board lost its marketing monopoly Aug. 1, 2012, to a private enterprise.
The pitch comes after shipping delays last crop year saw the basis (difference between elevator and port prices) widen to unprecedented levels, costing farmers, by some estimates, millions of dollars.
“Every time farmers ship grain they’re looking at grain-handling and -marketing margins pushing $40 a tonne,” Bob Friesen, CEO of Farmers of North America Strategic Agriculture Institute, said in an interview Sept. 11. “If you look at the cost of the basis over the last year that some have tagged at close to $4 billion you’re looking at an awful lot of reasons for farmers to own grain handling and marketing.”
But when asked if FNA had discussed the plan with CWB, Friesen, declined to comment saying he couldn’t because of a non-disclosure agreement.
Friesen never once mentioned CWB during the interview even though FNA’s website does, referring only to a “majority farmer-owned grain company.”
CWB CEO Ian White declined a request for an interview.
“CWB isn’t commenting on the privatization process,” CWB spokesman Richard Martin wrote in an email.
In April when CWB was commenting, White said CWB intends to provide a privatization plan to Canada’s agriculture minister before the 2016 deadline set out in legislation, which also requires CWB to be privatized or wound down by 2017.
“We expect our privatization to happen sooner than that,” White said. “We are expecting to be able to get a plan to government this year and then the process will take place after that.”
White has said in past interviews that CWB wants farmers to be major players in its future. To that end in the 2013-14 and 2014-15 crop years CWB is giving farmers $5 of equity in a privatized CWB for every tonne of grain delivered. The amount allocated in future years will be determined annually, CWB says on its website.
When asked for comment on FNA’s plan Agriculture Minister Gerry Ritz said: “FNA, like many others, clearly recognizes the enhanced value to farmers of the new CWB under marketing freedom.
“The new CWB is increasing its capacity to become a vibrant marketing option for farmers,” he added, alluding to CWB’s new elevator construction and recent elevator purchases.
When working on plans to sell and distribute nitrogen FNA realized it made more sense to handle and market grain and distribute fertilizer from the same facility, Friesen said.
“Then we decided we better talk to farmers about it,” he said, adding harvest is the worst time of year to reach farmers, but the timing is beyond FNA’s control.
“In order to take advantage of this opportunity, we are setting up a farmer-based limited partnership which will need a commitment from between 3,000 and 10,000 farmers, each investing $10,000 to $50,000 or more, depending on the size of their production and the average level of investment,” FNA’s website says.
Friesen stressed the proposal is open to all farmers, not just FNA members. Also, FNA is asking farmers for a letter of commitment right now, not money.
“We’re not trying to recreate the CWB and we’re not trying to recreate the Pools (farmer-owned co-operative grain companies, which evolved into Viterra, now owned by Glencore),” Friesen said. “We want to build a dynamic state-of-the-art, world-class, grain-handling and -marketing company. I think this is what farmers want. I believe nowadays farmers can do this without making the same mistakes that were made in the past.
“If farmers own the grain handling they would be able to capture some of those grain-handling margins, as well as, mitigate the cost of that $4-billion basis.”