The Canadian Wheat Board has mapped out what it will need from Ottawa to survive, with legislation to end the board’s single marketing desk for Prairie wheat and barley now on the House of Commons’ notice paper for Tuesday.
The board has “identified concrete requirements for any new entity to succeed — and the federal government needs to address them,” chairman Allen Oberg said in a release Monday.
“This information was shared with (federal Agriculture) Minister (Gerry) Ritz in July, but we continue to be stymied by the government’s inability to provide answers — despite its stated objective for a ‘strong and viable’ grain-marketing entity in an open market,” said Oberg, who farms at Forestburg, Alta.
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“While the minister attempts to paint CWB directors as being unco-operative, we have in fact been taking these issues very seriously, without any meaningful response from government regarding these basic requirements.”
Ritz held a media event Monday morning at a farm at Acme, Alta. to reiterate the government’s plans, including legislation titled An Act to reorganize the Canadian Wheat Board, to be tabled Tuesday in the Commons.
The government restated that it’s “committed to providing farmers with choice in how they market their grain, including the choice to continue using marketing options provided by the Canadian Wheat Board.”
To that end, Oberg on Monday provided the board’s list of needs for a post-single-desk grain marketing entity.
“Comfort to lenders”
Those include $225 million in capital to finance grain inventories and conduct its business operations. “Under the circumstances and given the proposed timelines, it would not be possible for a new entity to raise equity from the private sector,” the CWB said.
The government would also have to provide guarantees of borrowings by the new entity for a period of at least five years, plus debt financing, the board said. “It would not be possible for a new entity to access debt financing without government guarantees, given that any new entity would have no business track record to provide comfort to lenders.”
New York credit rating agency Moody’s said in June that if a change in the CWB’s status were to lead to reduced government guarantees, future debt programs “would likely be rated several notches below CWB’s current ratings” of Aaa senior and P-1 short-term.
Also, the CWB said Monday, a risk reserve on the order of $200 million would be needed for a new entity to offer price pooling to farmers “with initial payments that could attract sufficient grain deliveries.”
The federal government, given the short time frame, would also need to act as the initial owners of a new entity with a share-capital structure, with an “appropriate exit strategy” for the government to later divest its shares in a new entity, the board said.
The government would also have to ensure regulated and “competitively priced access” to grain handling facilities “with service levels that would enable third parties to effectively compete,” the CWB said, and a new entity would also need authority via new regulations “to direct its own grain to port terminals of its choosing.”
Oberg said the requirements for a new entity were identified after “extensive analysis” by CWB staff and by consulting firm KPMG.
“Some implications”
The Canadian Press news agency on Monday quoted Oberg as saying the CWB also plans to “put this issue before the courts” and that its board of directors will meet to discuss a possible legal challenge as soon as Ritz’s new legislation is tabled.
However, a pro-single-desk group, the Friends of the Canadian Wheat Board, has long since moved to challenge the government’s legislative plans in court.
The group plans to claim that Prairie farmers expected to be able to vote on the wheat board’s future, given the requirements of the current Canadian Wheat Board Act and comments made by a number of federal Conservative candidates prior to the election in May.
FCWB’s Winnipeg lawyer, Anders Bruun, last week told the Manitoba Co-operator the group’s case is now scheduled to be heard in Federal Court in Edmonton on Dec. 6.
“Given that (the court case) has some implications for Parliament and its proceedings, it will move along a little more quickly than it might otherwise,” Bruun said.
