Government Backing Solidifies Future for
New CWB
In the guts of Bill C-18 we find
significant support from the federal
government in the form of government-
backed borrowings and initial payments
for a period of up to five years. Many
people were surprised to see such a deep
and long-term commitment from Ottawa to
help the CWB transition into a
commercial organization. Likely,
policymakers were responding to concerns
raised last summer and fall that the
timeline of August 1st, 2012 was too
tight for all of the old-crop pool
close-out issues to be dealt with while
simultaneously determining the path to
create a successful new organization.
At the same time, the legislation allows
all buyers to contract grain directly
from farmers (for delivery August 1st,
2012 forward) as soon as the Bill is
passed and receives royal assent. This
is expected to happen in December 2011.
So, in the not-too-distant future, we’re
going to be facing new pricing
opportunities for wheat, durum and
barley from a wide variety of buyers.
The contracts and their terms, the
schedule and plan for taking delivery,
and of course the prices, will all be
new information for Prairie grain
producers to interpret and make
decisions about.
It’s too soon to say exactly what
growers will be offered, but we do
expect the offers to come from new and
traditional buyers, including a
voluntary CWB, who is also going to be
bidding for non-Board crops. They got a
great big carrot in the form of
government financing of their grain
inventories and working capital, to
bring the grain handling companies to
the table to negotiate fair handling
agreements.
Shortly after getting feedback that
their timeline for change was pretty
tight, Ottawa heard concerns about the
amount of operating capital the private
grain trade would have to come up with.
$1.5 billion was one credible
consultant’s estimate of the amount of
new financing the industry would need to
access in order to handle farmers’ Board
grains. While it doesn’t make this
number go away, continued backing of
initial payments by Ottawa for the CWB
does reduce the financing burden of the
elevators by whatever portion of the
crop that the new CWB does handle.
Giving the trade this incentive to
handle the new CWB’s grain further helps
the organization’s chances of securing
reasonable rates from the line companies
for originating and trans-shipping grain
to port on their behalf. This is
critical to the CWB being able to earn
farmers’ business through competitive
country pricing.
It’s long been feared that the private
trade would shut a voluntary Board out
of the marketplace, but since Bill C-18
was tabled every one of the big 3 grain
handlers has publicly stated their
willingness to work together. Looking
deeper into the initial financing terms
the new CWB has been given, and the
positive implications for its handling
partners, these are credible claims.
www.farmlinksolutions.ca
New CWB
In the guts of Bill C-18 we find
significant support from the federal
government in the form of government-
backed borrowings and initial payments
for a period of up to five years. Many
people were surprised to see such a deep
and long-term commitment from Ottawa to
help the CWB transition into a
commercial organization. Likely,
policymakers were responding to concerns
raised last summer and fall that the
timeline of August 1st, 2012 was too
tight for all of the old-crop pool
close-out issues to be dealt with while
simultaneously determining the path to
create a successful new organization.
At the same time, the legislation allows
all buyers to contract grain directly
from farmers (for delivery August 1st,
2012 forward) as soon as the Bill is
passed and receives royal assent. This
is expected to happen in December 2011.
So, in the not-too-distant future, we’re
going to be facing new pricing
opportunities for wheat, durum and
barley from a wide variety of buyers.
The contracts and their terms, the
schedule and plan for taking delivery,
and of course the prices, will all be
new information for Prairie grain
producers to interpret and make
decisions about.
It’s too soon to say exactly what
growers will be offered, but we do
expect the offers to come from new and
traditional buyers, including a
voluntary CWB, who is also going to be
bidding for non-Board crops. They got a
great big carrot in the form of
government financing of their grain
inventories and working capital, to
bring the grain handling companies to
the table to negotiate fair handling
agreements.
Shortly after getting feedback that
their timeline for change was pretty
tight, Ottawa heard concerns about the
amount of operating capital the private
grain trade would have to come up with.
$1.5 billion was one credible
consultant’s estimate of the amount of
new financing the industry would need to
access in order to handle farmers’ Board
grains. While it doesn’t make this
number go away, continued backing of
initial payments by Ottawa for the CWB
does reduce the financing burden of the
elevators by whatever portion of the
crop that the new CWB does handle.
Giving the trade this incentive to
handle the new CWB’s grain further helps
the organization’s chances of securing
reasonable rates from the line companies
for originating and trans-shipping grain
to port on their behalf. This is
critical to the CWB being able to earn
farmers’ business through competitive
country pricing.
It’s long been feared that the private
trade would shut a voluntary Board out
of the marketplace, but since Bill C-18
was tabled every one of the big 3 grain
handlers has publicly stated their
willingness to work together. Looking
deeper into the initial financing terms
the new CWB has been given, and the
positive implications for its handling
partners, these are credible claims.
www.farmlinksolutions.ca
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