WINNIPEG, Manitoba (Reuters) - The 77-year-old Canadian Wheat Board, which will soon lose its monopoly hold over Prairie grain, will be ready to compete openly in the fierce global grain market within weeks, according to the man charged with transforming it.
For the first time in generations, the Wheat Board must compete against heavyweights like Cargill CARG.UL, Viterra VT.TO and Richardson International for Western Canada’s 2012/13 wheat, durum and barley, with its monopoly expiring before the next harvest begins.
Its rivals - eager to seize market share of Western Canada’s prized supplies of grain for baking, pasta production or beer-brewing - have a head start in signing farmers to forward-delivery contracts for crops they will grow this summer.
Now the Wheat Board is set to wade in by late February, starting with open-market cash and pooling contracts for wheat, durum and barley.
“We are ready to go and we will have a full range of contracts out there,” said president and chief executive officer Ian White, in an interview with Reuters at his Winnipeg office.
A Canadian law will strip the CWB of its control over Western Canada’s wheat and barley for export or human consumption on August 1. But the law also gives the CWB the option of buying crops from across Canada and around the globe - not just the Prairie crop belt.
And the CWB also intends to branch out from grains by buying canola later this year, with peas possibly following, White said.
“If we see opportunities in the other crops, we certainly will be there.”
All that’s keeping the government-controlled Wheat Board out of bidding at present is agreements it needs to strike with grain handlers to store CWB grain in country elevators and port terminals, since the Wheat Board owns no such assets itself.
Grain handlers have been open to dealing with the board, White said - not hostile as former CWB directors predicted. And ongoing challenges by farmers of the government’s monopoly-busting law have not slowed the board’s plans either.
Canada is the world’s biggest exporter of spring wheat for baking, durum wheat for pasta production and malting barley, nearly all of which the CWB currently sells for farmers.
Revamping the Wheat Board is in a way, deja vu for White, who helmed Australia’s Queensland Sugar before joining the CWB in 2008. There he oversaw the transformation of a monopoly seller of Australia’s raw sugar exports into a large seller that still controls most supplies on a voluntary basis.
“While it’s not the same (as what’s ahead of the CWB), it does tend to equip you for the change environment,” he said.
Longer term, the board’s plans are less clear.
Ottawa has promised to guarantee the Wheat Board’s borrowings and payments to farmers for up to five years, after which it will have to stand on its own in some, yet-undefined private-sector model.
The Wheat Board hasn’t decided who will ultimately control it, but White said farmers will be part of the ownership mix.
“In some way, we will be expecting that farmers will be part of our shareholding base. In my way of thinking it’s a bit of a unique space that we can fill.”
The board is not currently contemplating acquisitions or mergers with small- or medium-sized grain handlers, as it focuses on simply getting its open-market programs running. But White acknowledged there is a natural potential marriage between the CWB with its vaunted export contacts and the dozen independent grain-handling terminals across the Prairies.
“We’re talking to everyone, but ... certainly the smaller players are of interest to us and I think we’re of interest to them.”
The board may not have grain elevators, but it does own more than 3,000 rail hopper cars. Those are assets White expects the CWB to be able to use to its advantage, instead of the government potentially selling them off to offset the board’s downsizing costs.
White began to trim the CWB’s 400-person workforce last month, and hasn’t decided yet how small it will get. The priority now is to maintain the expertise the board needs to market the rest of last autumn’s crop as the monopoly winds down, while morphing into an open market player.
The CWB’s transition to the new world after August 1 could arguably be easier if it held back supplies from the previous harvest, giving it a critical mass of grain volume to ensure it’s a competitive player.
But White said the CWB always has some leftover grain to market in August, September and sometimes October - the first months of a new crop marketing year - and he doesn’t expect more leftovers than usual after its monopoly expires.
Likewise, farmers aren’t sending signals that they will lock their bins from the most recent harvest, only to sell it on the open market, he said.
“This is going to be a big change for a lot of farmers and we think the CWB can help farmers through this transition period. And we’re ready to do that.”
Reporting by Rod Nickel in Winnipeg; Editing by Bob Burgdorfer