Depape and Agriweek on CWB ships

[Fransisco]

from the CWB monitor

<b>So the CWB wants to buy a couple of lakers.</b>

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.


http://www.cwb.ca/public/en/newsroom/releases/2011/news_release.jsp?news=020811.jsp

http://www.discovermoosejaw.com/index.php?option=com_content&task=view&id=15910&It emid=403

http://soumat.ca/

http://www.grainscanada.gc.ca/statistics-statistiques/tariff-tarif/ts/ts-ts-eng.htm

[Fransisco]

From Agriweek...

<b>Aristotle Oberg
The Wheat Board goes ship-shop-ping</b>

Too bad there is no clause in the Canadian Wheat Board Act forcing the Board to be truthful in its communications with farmers and the public, the penalty for a breach being the firing of all directors. If there were, a statement such as “Prairie farmers will become owners of ships that move their wheat on the Great Lakes”, which started off a news
release last week, would have precipitated useful action.

The Wheat Board made the surprise announcement, soon after the first meeting of its new board of directors, that it is buying two new bulk lakers for Great Lakes-Seaway service. Prairie farmers will not own them because prairie farmers do not own the Board. The beneficial owner will be the Board’s sole shareholder: the taxpayer of Canada.

The ships will be operated for the Board by Seaway Marine Transport, a joint venture of Algoma Central and Upper Lakes Group. The Board figures it will save $10 million a year in shipping costs after the vessels are paid for eight years after they go into service. The ships, to be delivered in 2013 by a Chinese shipyard, will cost $65 million, to be
paid for by money borrowed at government-guaranteed interest rates and paid back out of the pool accounts at the rate of a dollar per tonne. A 25% tariff on vessels not made in Canada was recently removed.

The announcement plainly gave away the real reason for this ludicrous act: “to strengthen farmers’ position”
(actually to further entrench and strengthen the Board). “This historic step puts us at the helm”, said chairman Oberg. “Farmers will share in the control and the profits of Great Lakes grain shipping.”

What the announcement did not say is that the deal includes some unexplained agreement between the Board and Algoma and Upper Lakes for the use of up to eight of their ships for Board grain. Both companies are also buying new bulk vessels and the Wheat Board ships will be part of those orders.

Agriminister Ritz criticized the deal in the House, but did nothing to stop this egomaniacal adventure. He not only
can but has the responsibility to do so. Indeed the Board has just given him an opportunity for a showdown. The deal appears very unpopular with farmers.

The only possible cost saving from ship ownership is in the difference between the Board’s cost of capital and the cost to commercial ship operators. If buying two ships was economically justifiable, why stop at two? Seaway Marine Transport will not operate the ships at its bare cost, and all other costs will be the same or higher for the Board. It is unknown whether eastward-bound grain traffic will be maintained far into the future at levels needed to use the ships efficiently, or what commercial shipping rates will be. The Board will be in competition with private ship operators and the reduced amount of business it has to offer others will remove any leverage that it may now have. It will also have less incentive to use the portof Churchill or to run a winter rail program. If the Board low-balls export offers out of eastern positions in the future to use its ships, no one will ever know.

[bucket]

They have essentially stole the equivalent my kids education fund without my consent.

It pisses me off.

There is no way that they can operate these ships and return money to farmers. If the logic was true, our freight rates by owning railcars would be lower given the consolidation in the elevator system.

I have asked a director to send me the business plan for these ships. I doubt the cwb will ever let farmers see it.

[GodLovesTheUSA]

How times change. Many of our industry leaders started their activist careers by presenting themselves as gun slingers for the industry. In the beginning they are hell bent on destroying the establishment that does not seem to be working.. and they end up becoming part of the establishment (industry representation). In the end they learn that really little can be done and the market is not controlled by cattlemen’s organizations, either here in the USA or there in Canada. We are servants of the market place. All that is gained is that the new industry leaders gain that all important monetary compensation. In fact the new leaders soon become dependent on the monetary compensation that is provided.. this compensations is especially rewarding when the new leaders can stay involved in the industry we all love. We all need a dependable income which ranching does not always provide. Maybe you have some guys like this in Canada.
I was never an RCALF supporter and I am a free trader. It is nice to see the market get stronger. Maybe we can make some money raising beef on both sides of the border.

[parsley]

Nothing was a surprise. This is well-disciplined strategic CWB planning by communist directors.

They will add other grains to the Board. Count on it. Canola will most likely have a &quot;trial pool&quot; before long. Or bribe you with &quot;subsidized shipping.&quot;

The CWB ran a &quot;trial pool&quot; on organics, tromped the countryside in cowboy boots, discussed and listened to their supporters and ignored the rest.

The CWB is run by people on a political mission. Common good. Unionization. Social justice. Pooling.
Compulsory participation. They are the kind of folks who would have joined the 2010 flottilla in the name of 'solidarity'.


One can learn something about strategy by reading &lt;p&gt;&lt;/p&gt;
&lt;p&gt;&lt;strong&gt;[URL="http://www.nationalreview.com/articles/259614/islam-egypt-andrew-c-mccarthy?page=1"](these articles (5 pages icl the 3 pages on Turkey which you do NOT want to miss. Compare Brotherhood tactics to CWB tactics. And CWB strategy.)[/URL]&lt;/strong&gt;&lt;/p&gt;

[wd40]

You said it well.

Let me recomend a book called "The Road to Serfdom" by by F.A. Hayek. I think first published in 1940. Makes alot of politicians and bureaucrats very mad. He saw it comming back then and our producer groups still don't see it.

Cut a past the book title into your search box.

Back in 2004 we had hired some e-CEO's from IBP and they told us how USDA systematically rotates CFO & CEO’s from the mulit-national world through a stint with USDA office. HMM wonder why.

Producer groups are always in bed with the stakeholders.

[per]

Wd could you clarify whom you mean by producer groups and who are the stakeholders?

[wd40]

Typically producer groups like ABP, Canola Growers, etc, evolve or should I say distil the loudest most powerful producers into leadership. They being "joined at the hip" or "held hostage" by the muli-nationals eventually bring to the organization table stakeholders being the multi-national representatives. Resulting in “regulatory capture”.

[SADIE]

Right on Wd40-----you said it very well.

[per]

Thanks Wd, I just wanted to confirm what I thought you meant. The exact reason that check off groups should not be driving policy.