Farmers face dilemma in buying CWB

Short of bad weather and funerals, there isn’t much that would convince farmers to leave their fields and head to town in the middle of a long, drawn-out harvest like this year’s.
Add the possibility of investing in their own grain company to the list.
During the past three weeks, farmers across the Prairies have been attending town hall meetings organized by Farmers of North America (FNA) and expressing willingness to put some serious money into its plan to buy the assets of the CWB.
If the bid is successful, the government-owned grain company created in 2012 when the federal government eliminated the marketing monopoly of the former Canadian Wheat Board would become part of Genesis Grain and Fertilizer Ltd., a grain-handling, marketing and input-distribution business owned by FNA and its farmer investors.
FNA, which calls itself a business alliance dedicated to maximizing farm profitability, is a curious entity in the milieu of farmer collectives. While it accomplishes some of the same functions as a co-operative, it is not a co-operative. It is a privately owned, for-profit company started in 1998 by Saskatchewan farmer James Mann.
Nor is it a farmers’ Costco, although farmers pay to belong and it negotiates discounts on things such as herbicides, fertilizer and equipment parts on their behalf.
By its own description, FNA’s more than 10,000 members “multiply their market power by forming a large, attractive purchasing base, and by using their combined capital assets to create a world-scale investment platform.”
More recently, members are being offered ownership opportunities including ProjectN, a proposal to build a fertilizer plant in Belle Plaine, Sask., and now the opportunity to bid on the CWB, its grain-handling facilities, approximately 3,400 railcars, a terminal at Thunder Bay, Ont., and two lake vessels under construction.
The concept of farmers buying into the value chain is as old as farming on the Prairies, but it’s new to this generation of farmers, many of whom were ambivalent to the former Canadian Wheat Board and downright antagonistic to the co-ops that once dominated grain handling in Western Canada.
But according to FNA, they are interested in investing in this new enterprise, largely because many felt they got shafted by the grain companies as well as the railways last winter.
“Farmers are very aware that if they want to accrue benefits from the value chain, they have to own part of the value chain,” said Bob Friesen, FNA’s vice-president of government affairs at a news conference Thursday.
He said the 1,000 or so farmers FNA has met with during the past three weeks are willing to commit $50 million — enough to convince him that given a bit more time, FNA will raise the $250 to $300 million it estimates the current CWB is worth.
The question Friesen and Mann raised this week is whether they’ll have the six weeks to two months they say is needed to drum up the necessary farmer support. For reasons that are unclear, they are convinced the federal government’s sale of the CWB, which by legislation needs to occur by 2017, is imminent.
“If the privatization of the CWB has been accelerated such that another entity acquires it before Genesis can raise the necessary funds, this once-in-a-lifetime opportunity for Canadian farmers will be lost forever,” Friesen told reporters.
FNA has filed a memorandum offering limited partnership units, with Laurentian Bank Securities Inc. acting as agent. It’s promising the company would be owned exclusively by farmers, whose minimum investment of $10,000 can be in the form of grain inventory. As well, the federal government has said the purchase price won’t go into federal coffers, but rather remain as an investment in the company.
It’s an interesting proposition, but one that leaves farmers with a dilemma.
The former CWB was structured to maximize farmers’ returns from the marketplace. The FNA model has so far been driven by applying competitive pressure on farmers’ costs. As any farmer who has invested up the value chain has learned, the return on investment at one end usually comes at the expense of the other.