FNA gauging farmer interest in bid for CWB

Farm input buying group Farmers of North America (FNA) is feeling out Prairie farmers’ appetite for investment in a bid for control of CWB.

Saskatoon-based FNA, already in the midst of a plan dubbed “ProjectN” to develop fertilizer manufacturing assets by 2017, last week launched a separate online campaign seeking farmer expressions of support “to build a world-class farmer-owned grain handling and fertilizer distribution company.”

That plan, FNA said, would start with “the transformational move of purchasing a majority interest” in the former Canadian Wheat Board.

FNA noted ProjectN, in any case, needs an additional fertilizer sales and distribution network to handle its fertilizer plant’s product plus “other major crop inputs.” [Related story]

Describing its new plan as “an opportunity that we believe cannot be overlooked,” FNA proposes setting up a “farmer-based limited partnership” seeking commitments 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.”

Such commitments could be in the form of either cash or grain, FNA said, and would go toward investment in a grain handling and fertilizer distribution network even if the bid for CWB is unsuccessful.

On its website, FNA asks interested farmers to sign a “non-binding letter of commitment” which would later be “superseded by a formal detailed offering memorandum and subscription documents.”

Enough signed letters of commitment, FNA said, would allow the company to show CWB and the federal government that “farmers have the financial capacity and the necessary commitment to this project.”

FNA acknowledged it’s seeking farmer interest right in the middle of harvest, but said the timing of the proposal “is not by our design.” FNA said it’s “bound by confidentiality obligations” and can’t give reasons; nor did it give a deadline date for letters of commitment.

On track for privatization since the federal government deregulated its single marketing desk for Prairie wheat and barley in 2012, CWB represents a “rare sale of a block of grain handling assets that will likely not come again in our lifetime,” FNA said.

Winnipeg-based CWB has handling agreements in place with the Prairies’ line grain companies, but has also been investing in physical grain handling assets in recent months, buying independent handlers Great Sandhills Terminal and Prairie West Terminal plus the handling assets of Mission Terminal.

CWB is also preparing to build three Prairie high-throughput terminals and has said more such sites are to be announced.

The former Wheat Board has also already committed to a farmer equity plan, in which farmers who deliver against CWB contracts to any Prairie elevator will be eligible for an ownership stake in CWB after it’s fully privatized.

“Uncontrollable expenses”

FNA last week said its business team and financial advisors find the “synergies on the physical footprint alone,” such as land, track and equipment, make a “compelling case for expanding our plans to encompass grain handling” alongside the ProjectN business.

But it’s “urgent” to move now on a bid for CWB, FNA said, noting ProjectN “needs certainty about the scope and physical positions of its distribution system… so that its build-out can occur while the plant itself is being built.”

Also, the “publicly expressed determination of the CWB to complete the privatization well ahead of the government deadline means that we should act before that opportunity to accelerate the development of our plans is lost to another potential buyer.”

In FNA’s proposed plan, the amount paid for the assets of the CWB “will stay invested in the company to fund its improvement and expansion” such as increased West Coast export terminal access, expanded inland terminal capacity and “various delivery options for farmers, including strategic and favourable use of producer cars and producer car loading sites.”

Poor rail performance and lack of competition in the grain handling and marketing sector and the “related challenges” have been estimated to cost farmers “hundreds of millions, possibly billions, over the last year alone,” FNA said.

Investing in CWB, FNA said, could “potentially eliminate a significant amount of uncontrollable expenses from farmer bottom lines in the future” and could allow farmers to “capture and accrue these profitable handling and marketing margins for themselves.” – AGCanada.com Network