The Canadian arm of U.S. agrifood firm Cargill has become the first Prairie grain handler to commit elevator and port terminal space to an overhauled CWB.
The deal, announced Thursday, marks CWB’s first for grain handling services since the federal government moved to wind down the former Canadian Wheat Board’s single marketing desk for Prairie wheat and barley, effective Aug. 1 this year.
Having an agreement in hand with Winnipeg-based Cargill is expected to allow CWB to roll out its new suite of grain pooling and marketing programs for farmers by the end of this month.
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"We are very pleased that Cargill, with whom we’ve partnered very successfully in the past, has become the first player in the Canadian grain industry to find innovative ways for us to work together," CWB CEO Ian White said in a release.
CWB pools and cash contracts, including futures-based programs and malting barley production contracts, will be available for farmers to sign up within the next few weeks, White said.
Cargill’s Canadian president Len Penner said in the same release that the deal "allows us to present the most complete offering of wheat marketing tools to western Canadian growers."
CWB, he said, "has a proven track record of managing a western Canadian wheat pool. It is only logical that farmers continue to have access to CWB pools, if that’s what fits for them."
Farmers who market through the CWB will get access through this agreement to Cargill’s 30 Prairie grain handling facilities, plus "critical" port access at Vancouver, Thunder Bay, Ont. and Baie Comeau, Que., White said.
"All possible resources"
Cargill’s agreement comes just over a week after a letter from the Grain Growers of Canada to CWB and the membership of the Western Grain Elevator Association (WGEA) urged them "to use all possible resources to successfully conclude their ongoing negotiations on handling agreements."
Supporters of the Canadian Wheat Board’s single marketing desk have previously said mainline grain handlers would not be interested in signing agreements with a company that’s now a competing grain marketer. GGC executive director Richard Phillips, however, predicted companies will play ball to maximize their elevators’ grain handle.
"We’ll be trying to do the best deal we can for farmers in the handling system and recognizing the grain handling companies do have a cost of handling the grain and they have to make a margin," White said in an interview with the Manitoba Co-operator Jan. 31.
White said he expected there would be competitive tensions between the board and grain companies, but added he was confident agreements would be reached. At that time, he had expected CWB’s pricing options to be rolled out during February.
"Different terms"
When the board had a monopoly it negotiated one handling agreement with all the companies through the WGEA, association executive director Wade Sobkowich said in the March 1 Co-operator.
"But now that we’re dealing in an open market environment, different companies will have different terms," he said.
The GGC recognizes handling agreements are key to the success of a voluntary board and that’s why it wrote the letter, Phillips said.
The board and companies are entering uncharted territory and that’s partly why the process has taken so long, he added.
"At first I was suspicious one side or the other might be dragging their feet but as we got into this we saw the complexity," Phillips told the Co-operator’s Allan Dawson.
For example, it’s unclear how the prices for lower grade wheat will be set.
"Once you see the first couple of deals signed I think you’ll see the rest come quickly," Phillips said.
Federal Agriculture Minister Gerry Ritz, in a separate release Thursday, described the agreement with Cargill as "further proof that the CWB can be a viable and competitive marketing option for farmers."
The announcement, he said, "gives farmers the clarity and certainty they need to move forward with their business plans and rightfully market their own wheat and barley."
Related stories:
CWB ready to compete, expecting to be profitable, Feb. 7, 2012
CWB not yet buying 2012-13 grains, Jan. 14, 2012
