Concern and confusion surrounds CWB privatization

SASKATOON – Farmers are telling us that they are deeply disturbed about the CWB privatization process. Recently, FNA learned that their bid to acquire the CWB, backed by strong farmer-interest, was rejected. This is a clear message that there is no interest from CWB management to include farmers in a meaningful way in the privatization process.

The confusing part is that, now CWB management is saying they are surprised that FNA thinks they’re out of time to reach out to farmers and raise adequate equity for a successful bid. If farmers are not out of time, then the reason for rejecting the farmer bid is…just because it’s a farmer bid? Or contrary to what CWB management claims, it is a time issue. Farmers will easily believe either one. What they will not believe, is that FNA, a farmers’ business alliance, would have bothered them during a very difficult harvest season if it was not a time issue.

Documentation confirms that FNA only received clearance from CWB management on what they could talk to farmers about early in September, 2014. On October 20, CWB informed the farmer bid that it was being rejected. That is just over a month. Even at that, over 1000 farmers expressed interest in investing 50 million dollars in the project. What would have been the harm in telling farmers they could have some additional time to talk to other farmers if “they’re not out of time”, and/or to finish negotiations with interested strategic investors?

Farmers are also not impressed with the attempted spin by the CWB on whether it’s a sale, partnership, or simply an equity investment. The fact is, the CWB is looking for a majority owner and can apparently provide no assurance that the farmers’ trust is guaranteed to be at a meaningful level, how soon it will reach that level, that it will not be diluted, and that the majority owner will not simply buy it out after a few years.

While there has been a lot of media speculation on the elements of the CWB privatization process, farmers need to consider what a privatized CWB looks like:

  • By rejecting the farmer bid the CWB basically told farmers to take a hike, yet when some company is successful in acquiring majority ownership of the CWB, they will expect farmers to deliver to them anyway. What part of this is hard for them to understand? Privatization, as it currently stands, will largely leave farmers out of the equation. A farmer majority owned company would build delivery volume through farmer loyalty to create financial sustainability, both for the company and for the farmers.
  • The CWB started a Producer Equity Plan to represent farmer ownership. After reading their public disclosure document on the Plan, judge for yourself how much confidence you have that it will create a meaningful level of farmer ownership. How much farmer ownership has been achieved over the last two years and how much farmer ownership will be allowed and honored by the new majority owner, and for how long?
  • A major existing grain company, or any other buyer for that matter, acquires majority ownership of the CWB, assumes ownership of the assets and keeps its own purchase money to build out the company. How will this address the excessive margins companies were making over the last year by discounting the price to farmers and how will it transform grain handling and marketing margins from pure costs to farmers, into revenue for farmers?
  • The assets that the CWB has (elevators, building, people, mission terminal, hopper cars, etc.) that would have allowed farmers to hit the ground running to build a farmer majority owned globally competitive grain company now become the property of some other company. How will this change the industry landscape to benefit farmers, to better position farmers in the marketplace and in the grain handling sector?
  • A company that is successful in acquiring majority ownership of the CWB will also assume ownership of the CWB hopper cars. Imagine the situation if the CWB car fleet disappears into the North American system once the CWB becomes acquired by one of the large multinationals. Suffice it to say, that company will control the very assets farmers require to move their grain to market. There are no options for the hopper cars; farmers are completely dependent on them. It is well understood by many grain market specialists that whoever controls the car fleet, controls the entire system. Should that control be in the hands of farmers or in the hands of another company that could either sell the fleet or use the cars in some other North American market that pays a premium, certainly not to the benefit of Canadian farmers?

Farmers are not interested in the CWB for nostalgic or ideological reasons. They recognize that the acquisition of the CWB is a great commercial opportunity, especially given the unique transaction terms. It is their opportunity to own, and accrue benefits from, the value chain. Farmers envision it to be run by industry experts to optimum industry standards, independent of government, with no expectations of government assistance or involvement in the future.

They certainly recognize that to accrue benefits from the value chain, farmers have to own part of that value chain. In the grain industry, without farmers in an ownership position, new ownership will change NOTHING. Think of it this way, wouldn’t you have rather been the grain company this past year? Farmers are deeply frustrated with the discounted prices offered by Canadian grain companies over the last year, and rightly so. Unless farmers have majority ownership of a globally competitive grain company NOTHING will change.

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Farmers of North America Strategic Agriculture Institute (FNA-STAG) is a not-for-profit organization with the single mission of “Maximizing Farm Profitability.”

For more information contact:
Bob Friesen, CEO: (613) 230-2222 / (613) 852-9711