Canada's biggest grain handler, Viterra Inc, is willing to work with the Canadian Wheat Board in an open market system and thinks the board can thrive without its marketing monopoly, Chief Executive Mayo Schmidt said on Friday. Ottawa intends to pass legislation by the end of 2011 to end the Wheat Board's 69-year-old grain monopoly as of August 2012, allowing Western Canada's farmers to sell wheat and barley for milling or export directly to grain handlers.
"I'm sure and hopeful that they will add value, and will be given every opportunity to do that, and thrive as a commercial enterprise here in Canada," Schmidt said in an interview with Reuters from Calgary, Alberta. The Conservative government will continue to guarantee the Wheat Board's borrowings and initial payments for farmers' grain under the proposed legislation, but it has refused the CWB's request for regulated access to grain handling facilities or start-up capital. The board, which had C$5.8 billion ($5.7 billion) in revenues in 2010-11, has no retained earnings of its own, or facilities such as country elevators and port terminals to store grain.
"If the Wheat Board chooses to engage with industry to frame out a relationship and access to the (grain-handling) system, which will be provided, I think their prospects will be greater if they do it sooner than if they do it later," Schmidt said. "The opportunity is now to take advantage of the openness and willingness of all players to welcome them as a participant."
The Wheat Board's chairman, farmer-elected director Allen Oberg, vowed this week to fight the government's plans, which he said amount to helping multinational grain handlers at farmers' expense. But Schmidt said competition for farmers' grain is bound to increase dramatically, as it has since the end of the Australian Wheat Board's grain monopoly three years ago.
Government support for the Canadian Wheat Board for up to five years likely limits the upside of an open market for Viterra, some analysts said this week. Schmidt said that's not the case and he expects the move to an open market to benefit Viterra next year, regardless of whether the CWB remains a significant player. "We'll have the ability to buy directly from the farmer, the ability to buy from the Canadian Wheat Board and we'll have the ability to move the products through the system," he said.
Viterra's biggest rivals in Western Canada are Cargill Inc and Richardson International Ltd, while Bunge Ltd has said it hopes to carve a bigger share of an open grain market. Once the legislation passes Parliament and survives a court challenge, grain handlers and the Wheat Board can begin signing forward contracts with farmers for the wheat and barley they will harvest next autumn.
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