Ottawa privatizes wheat board
Majority stake to be sold to U. S.-Saudi group
Since 1935, the Canadian Wheat Board’s existence as a Crown corporation has been among the most divisive issues for farmers across the Prairies, with many willing to go to jail to fight for their right to sell grain outside its monopolistic control.
But after a deal with a joint venture owned by Saudi Arabia and a U. S. grain trader was announced Wednesday, it’s the former Crown corporation itself that’s being sold to outsiders.
“This closes a chapter in Canadian agricultural history where farmers could be jailed for selling their own grain,” federal Agriculture Minister Gerry Ritz said at a news conference held in Winnipeg.
G3 Global Grain Group, a recently formed joint venture between U. S. agri- conglomerate Bunge Ltd. and the Saudi Agricultural and Livestock Investment Co., has agreed to acquire 50.1 per cent of the wheat board in a deal that’s expected to close in July.
Under the terms of the deal, G3 is committed to spending $ 250 million in the CWB, which will continue to operate as a buyer of farmers’ grains on the open market.
Now, however, it will try to operate across Canada.
“Our vision is to establish a highly efficient coast- to- coast Canadian grain enterprise that provides stronger market access solutions for growers,” G3’ s chief executive Karl Gerrand said.
The remaining 49.9 per cent of the wheat board will be held in trust for farmers, who can build $ 5 worth of equity in the CWB for every tonne of grain they sell into the soon- to- be- private company up to a cumulative total of $ 249 million.
G3 also has the right to buy the farmers’ stake in the CWB in seven years at what it termed “fair market value.”
One concerned Manitoba farmer, Dean Harder, took issue with the deal and the equity stake given to farmers, saying the arrangement doesn’t give grain producers control over the new entity.
He said farmers had more input in the operation of the wheat board when it operated as a “single desk.”
The CWB’s monopoly over wheat sales in Western Canada was eliminated in 2012.
However, University of Calgary political scientist Barry Cooper said the deal to privatize the organization was a powerful symbol, “the final nail in the coffin,” for an issue that the Conservative Party of Canada, and the Reform Party before it, had championed for years — though it continues to divide farmers.
Gary Stanford, a farmer in southern Alberta and president of the Grain Growers of Canada, said his members welcomed the deal and that “all the national organizations are in agreement.”
Stanford said he had no issue with the ownership structure of the new wheat board, and likened it to the now- defunct Saskatchewan Wheat Pool, a co- op in which members similarly built up equity through grain sales.
Levi Wood, the president of the western Canadian Wheat Growers and a Regina- area farmer, said the deal was a positive one for farmers because G3 is a new company that didn’t previously have operations in Western Canada.
“There would have been a lot less optimism had this been sold to one of the existing players,” Wood said, adding that G3’ s presence fosters more competition among buyers for Canadian grain.
The divisive power of the wheat board extends well beyond farmers on the Prairies. Cooper said the CWB’s existence as a Crown corporation has been a near constant ideological divide.
NDP MP Pat Martin took issue with the structure of the deal and said Ottawa was giving the CWB’s assets to “foreign entities free of charge.”
Since 2012, the CWB has acquired a network of grain elevators and port terminals from Saskatchewan to Quebec in an attempt to keep a handle on its market share.
Asked whether those assets were valued as part of the deal, Ritz said the CWB was highly leveraged and had taken on more debt to finance those acquisitions. He did not say how much debt the CWB had taken on.
“This transaction contemplates the paying down of that debt,” Canadian Wheat Board chief executive Ian White said during the conference call. “That’s part of the equity that’s being put in by G3.”