So who’s going to buy CWB (formerly “the Canadian Wheat Board”)? And where’s the money for new elevators coming from? Will they become “just another grain company”? How will farmers benefit?
These are all questions I’ve heard farmers asking each other during intermissions at hockey rinks, at coffee shops and on Twitter over the last few weeks, as CWB moves closer to privatizing.
Although Farmers of North America’s plan to turn CWB into a farmer-owned grain company appears to be dead, the media coverage and FNA’s farmer meetings have revived interest in what’s happening with the board and shed some light on some dark pieces in the privatization puzzle.
Yes, CWB says it’s not “for sale,” that it’s looking for a partner to replace the federal government, but that depends on how you look at it. They’re actively seeking an investment in exchange for ownership of assets — in other words, money for property, or “for sale.”
One question that keeps coming up as CWB builds new elevators and acquires smaller grain companies and port facilities — where’s the money for this coming from? It’s unclear because as CWB prepares to privatize, its financials have become harder to access (a detailed annual report for the 2012/13 crop year has not been made public.)
As with most Wheat Board-related controversy over the years, some farmers are offended because they believe they’re not getting what they’re owed. Without their consent, their money, left over from the single desk era, is being used to start this new grain company. But when you ask CWB spokespeople, they deny that the funds to build these big elevators belong to farmers. While the federal government contributed $350 million to wind down the single desk, CWB folks also say they’re not receiving any government funding for these infrastructure investments. Instead, CWB’s chief financial officer has said these projects are being paid for with “retained earnings and commercial borrowing.” Well, when were those retained earnings accrued? If the Wheat Board truly belonged to farmers, shouldn’t money (including what was in the CWB’s contingency fund) saved prior to August 1, 2012 belong to farmers? Based on anecdotal reports of how much grain CWB has handled since, it’s unlikely there has been significant growth in “retained earnings” post-August 2012.
Does that mean CWB is borrowing funds based on what it expects to receive from a private investor? There’s talk the price will exceed $250 million to acquire a controlling stake in CWB. FNA was looking to raise up to $380 million for its bid. If CWB is adding to its liabilities to pay for the new facilities, does that mean the purchase amount will go straight into paying off debt? Who will get the proceeds of the “sale”? Adding to the confusion, according to FNA, CWB is proposing a strange deal where the buyer will retain its offer amount on condition the bid is invested into the company’s new operations in Western Canada.
The other big question yet to be answered as this plays out — who’s the buyer going to be? The names that keep coming up are mainly American companies — ADM, CHS, as well as Bunge and some others who don’t have a major grain handling presence on the Prairies. Some of these firms have previously investigated opportunities for expanding or buying into Western Canada. Whoever it is, CWB management is looking to get the deal done as soon as possible — well ahead of the government’s 2017 deadline. It’s easy to understand why, as the current limbo state is likely not beneficial for CWB’s business.
Finally, how will farmers benefit from privatization? What about those assets accrued by farmers under the single desk? We can’t completely rule out compensation eventually going to some farmers as a result of the lawsuits filed against the government, one of which appears to be headed to the Supreme Court, but don’t expect any direct payments to all farmers who dealt with the board. CWB people have said regulations prevent the retroactive distribution of equity based on past marketing decisions. For farmers who have conducted business with CWB since 2013, they are promised future equity based on the volume of grain sold, but the value of that equity is unknown at this point.
So while there are many other questions still to be answered, if you’re a farmer, I think it’s simple: whenever the dust settles, you should hope CWB succeeds in privatizing. Whatever the answer is to all these questions, it comes down to sellers being better off if there are more buyers. If you’re looking to benefit in any way from the remnant of the single desk, your best (and probably only) chance now is through increased competition for grain from another viable buyer.