Is there anything that the Canadian Wheat Board does or says that does not come with controversy? This week the Canadian Wheat Board announced that they are purchasing two lake freight ships at the cost of $65 Million dollars. Much of the criticism came immediately from the Western Barley Growers and the Grain Growers but the CFA supported the concept.
There are several points and questions being discussed in many different coffee shops this morning.
- Is the purchase of assets outside the mandate of the Canadian Wheat Board?
- Why were farmers not aware of this shift in strategy, especially with the recent elections?
- Based on estimates, the cost to farmers is $1 MT over the next four years. Some are arguing that this is in poor consideration of soon to be retiring farmers who will see limited benefits from the ships. Others are saying that this money would be better put to use in farmers own pockets so that they could reinvest in their own farming operations.
- According to the CWB’s calculations, the ships will be paid for in 6-7 years and have an expected use of 25 years. The estimated net benefit over the life of the ships is $250 million which is returned to the CWB bottom line.
As you have heard me say before when the CWB is in the headlines, farmer’s brain’s leak out of their heads. Whether you are pro or anti CWB, it is hard to argue with the raw business numbers of this purchase. What is being played out in the media is the politics of the CWB which I am not all interested in. I think this is an interesting play for the CWB in the sense that if it works out it may lead to more transactions like this which will have a benefit to farmers. When you leave the politics out you can think more rationally and clearly. To me this is not a pro-choice or pro-single desk debate. What should be discussed is the business justification of the purchase and evaluate it properly.
If the profits are returned to general revenue, then the benefits are to all farmers in Western Canada. If the CWB’s is responsible for the marketing of farmer’s grain and if the savings are passed onto farmers then farmers are getting the benefit. If the CWB is utilizing lake frieght already and now can utilize it’s own asset this is good business. In my mind this is no different than a farmer buying a semi grain trailer because he is getting tired of paying custom haulers to deliver grain to the elevator for him. It is also the same as packing plants owning trucking companies to better vertically integrate and achieve logistic cost efficiency.
Everyone is talking about the mandate of the CWB and that this is a breech of it. It would appear after some research that owning ships is no different than rail cars. They are movable assets and not real estate. If the CWB purchased a grain terminal then that would classify as a breach of the mandate.
What’s your thoughts? Leave your thoughts or questions in the comment box below and remember no politics.