Tuesday, February 15, 2011

Ag Commentator Kevin Hursh Steps into the Laker Debate

Ag commentator Kevin Hursh has defended the CWB’s decision to buy lakers with farmer’s money by saying that the CWB directors are elected to make decisions on behalf of producers.

Yes, to a degree they are.  However, very few farmers – even some supporting the single desk – ever expected the board of directors to make the decision to take the CWB outside of its conventional role as grain marketer.  Even fewer expected the directors to make the decision to use farmers’ money to buy something not required to market grain – without even asking. (You can argue you need transportation services to market grain; but, you don’t need to own them.)

Mr. Hursh suggests that the price tag of $65 million “pales in comparison” to the money the CWB makes or loses in marketing decisions.  His comments align with the CWB’s condescension that this is no big deal, since it represents only $1.00/tonne.  To one farmer I talked to, $1.00/tonne over 4 years is equal to $16,000 – money that he would rather see come his way because of a total crop failure last year.

Hursh also suggests that buying vessels should be acceptable since the CWB already owns a fleet of 3,400 railcars.  He calls it a precedent but it’s not.

The situation back then was completely different – the fleet was made up of broken down boxcars and they weren’t going to last much longer.  Somebody had to buy railcars because the railroads refused, since there was no money in hauling grain under the Crow.  It was the Federal Government that bought the cars and made the CWB the owner. 

Back then, nobody took farmers’ money to buy the cars, like the CWB is doing to buy the lakers.  Also, railcars had to be bought by someone but nobody wanted to.  That is not the situation with these lakers; remember, Algoma and Upper Lakes are buying 6 lakers themselves.

Mr. Hursh likens the purchase of these lakers with the CWB’s investment in computers or staff training.  The difference he misses is that computers and training are required to sell grain – the CWB doesn’t NEED lakers to fulfill its mandate of selling grain.

But he misses an even more important point.  Farmers are being forced to pay for these lakers but they will never own them.  The CWB will own them, but farmers don’t own the CWB.

I guess in an ironic way this is proof that you can actually benefit from something without owning it.

Hursh really misses the message in the tea leaves when he suggests “The true, but unspoken reason for most of the opposition is probably the distaste for the CWB expanding its sphere of influence.”

Farmers are angry because the CWB is taking their money to spend it on something they don’t see as necessary and without being asked; they would rather invest in their own farm operations or their local communities – or pay bills.  It’s like being forced to pay for a B-train even though you’ll never own it and you prefer to use custom haulers anyway. 

As one farmer put it, “I don’t even let my kids spend my money.  And I love them.”

I’m John De Pape

Saturday, February 12, 2011

One Simple Question

I want to try something a little different - a survey.

One simple question:

Do you support the CWB’s purchase of lakers as reported by the CWB on Feb 8th, 2011?

By email to cwb@depape.ca simply answer yes, no, or maybe (don’t know).

Please identify yourself as a designated farmer or not.

Let’s do this as quickly as possible - I will report the results at the Western Barley Growers Association convention later this week in Calgary.  Remember, Ian White is speaking at this convention and it will be an excellent time to let the CWB know how you feel about this.
For more information about the conference, go to http://www.wbga.org/.

Spread the word.
John De Pape

(I know there's likely a way to do a survey on this weblog, but that would take too much time for me to figure it out.)

Friday, February 11, 2011

So the CWB wants to buy a couple of lakers

Surely this wasn’t just an impetuous reaction to the federal Government’s removal of a 25% tariff on imported vessels (announced on Oct 1st, 2010).  I give the CWB board more credit than that; I’m certain they’ve been developing this for a long time – long enough to have talked it over with farmers well ahead of making the decision.

Even though the CWB has had ample opportunity to discuss the concept with farmers, it failed to do so.  So what are we supposed to think when we read this quote from Maureen Fitzhenry in a recent news article?

"What we need to know is what the actual farmers of western Canada are thinking. That's why we have farmer satisfaction surveys, the annual producer survey, e-polls, accountability meetings and that's why we collect feedback from our front line staff," she said.

They clearly didn’t want to know what “actual farmers of western Canada are thinking” about investing in lakers.

If they had asked, I wonder how many farmers would have said “no, I don’t want you investing my money”.  If given the choice, I wonder how many would have voluntarily invested.  The CWB is stepping over the line, taking money it holds in trust on behalf of farmers and investing it against their will and their individual interests.  They shouldn’t be surprised with the outrage we’re seeing and hearing.

Is the CWB board so focused on some unspoken agenda that they’re willing to accept a little collateral damage?

Did you know....
One of the CWB’s partners in this venture is Upper Lakes Group, which, among other things, owns Soumat, which in turn owns: 
  • Mission Terminal, operating a terminal in Thunder Bay, two primary elevators in the prairies, and with financial interests in a number of producer car loading sites and short line railroads
  • Les Élévateurs des Trois-Rivières Ltée, a CGC-licensed transfer elevator located on the St. Lawrence River at Trois-Rivières, Quebec
  •  Les Grains Lac Supérieur Ltée, a grain trading company originating and distributing grain and by-products from Western Canada, Ontario, and Quebec to domestic and export markets.
And did you know...
The CWB already has a very close relationship with Upper Lakes:
  • Adrian Measner, ex CEO of the CWB, became President and CEO of the Upper Lakes Grain Group (Soumat) in October 2007.
  •  Mission Terminal is the largest producer car administrator, most of which are for CWB grains.  I’ve been told that the CWB ships 60% of its grain destined for Thunder Bay to Mission Terminal, even though it has only 10% of the capacity in the port.  The CWB favours Mission so much, in fact, that Mission applied to the Ontario Provincial government for $1 million to expand its capacity.  (This seems quite ridiculous when you consider there is excess capacity in Thunder Bay already and the other terminals would gladly (and efficiently) handle more CWB grain if given the chance.) 
  • Soumat’s grain trading company, Les Grains Lac Supérieur Ltée, includes CWB grains (red spring wheat (CWRS) and durum (CWAD) on their list of “products” they trade.  However, they are not listed on the CWB’s website as an Accredited Exporter. (So what are they doing for the CWB on CWRS and CWAD?
  • Soumat’s transfer elevator in Trois Rivieres handles CWB grains (among others).  Before Adrian Measner became responsible for this elevator, it handled an average of 1.4% of all CWB exports going east (via Thunder Bay and/or transfer elevators). Under Mr. Measner’s leadership, it’s handle of CWB grains has increased to an average of 7.7% of all CWB eastern exports.  To put it in tonnage terms, prior to Mr. Measner’s appointment, the terminal handled an average of 69,000 tonnes annually.  Following his appointment, the average annual handle has risen to 469,000 tonnes – a 580% increase.  (Is this good business or just a good “relationship”?)

Looking at everything that has gone on before, I have to ask: is partnering with Upper Lakes on these vessels just a coincidence, or is it part of a larger strategic plan for the CWB?  One that they haven’t shared with farmers.

Of course we don’t know the answer.  But we should.  If this investment is based on such a good business case as Allan Oberg claims, why is the CWB using farmers’ money without consultation?  Why has so much business been diverted to Upper lakes’ terminals (Mission and Trois Rivieres) in the last couple of years?  If it’s commercially driven, then what has changed?  There appears to be more going on here than just the purchase of two lakers; what is the strategic plan that encompasses all this?

The CWB has a dominant position in the grain industry with significant countervailing power over grain companies, railroads and laker operators.  Used properly, this power can ensure competitive forces keep costs in line - and that’s a good thing.  However, what the CWB has done with Mission Terminal goes well beyond exerting market dominance to ensure competitive forces work to the farmers’ benefit.  Is the CWB doing the same sort of thing at Trois Rivieres?

The idea is to get better service and rates through leverage of countervailing power; ignoring the other terminals in Thunder Bay to the point that Mission needs to expand demonstrates an unsettling disregard for the health of the industry that serves farmers.  Taken to its ultimate conclusion, it drives competition away – and that’s not good for farmers.

The CWB could have accomplished a similar financial result on behalf of farmers without using their money by negotiating an agreement much like they did with Mission Terminal.  And it seems to work there.  You know the old saying:  “Why buy the cow.....”.

On a personal note - the only upside to this whole thing is that this will give me loads to write about for months to come.  Stay tuned.