Canada merchants to handle grain for - rival - CWB

21st Jun 2012, by Agrimoney
If you can't beat 'em - yet - join 'em.

Six merchants, including Viterra, followed Cargill in handing a fillip to the Canadian Wheat Board grain by agreeing to handle its grain, even though the companies are soon to be competitors.

Reforms from August stripping the CWB of its monopoly over marketing western Canadian barley, durum and wheat have left the board head to head with traders in a battle to win farmers' patronage.

That would appear to question the advantage to merchants of agreeing to handle grain for the CWB which, even as the world's top wheat seller, has relied on other groups for support in shifting and storing crop.

However, many observers believe farmers used for decades to selling to the board may take time to switch to marketing alternatives, including private merchants, or the futures being offered by the Ice Canada and Minneapolis Grain exchanges.

Pool attractions

Brent Watchorn, a senior executive at crop handler Richardson International, said earlier this month that "some farmers have long-term relationships with the CWB, and are going to want to keep supplying to the CWB".

A particular attraction was the grain pooling operations the CWB is still the only company to offer, and which "farmers have become accustomed to", Mr Watchorn told a conference in London.

"A number of them will want to continue that price pooling," in which the CWB amasses large quantities of grain and attempts, in part by division into quality bands to meet accurately buyers' demands, to achieve the best value.

Richardson itself saw benefits in being a partner with CWB, he added, although the group was not on the list of six unveiled on Thursday, which also included Agro Source, Delmar Commodities, Linear Grain, Mission Terminal and West Central Road and Rail.

'Very pleased'

On Viterra, Ian White, the CWB chief executive, said the board was "very pleased to forge a new alliance" with the handler "that will greatly assist the CWB in marketing farmers' grain through our pool programmes".

He added: "Access to Viterra facilities means farmers now have a wide range of locations to deliver the grain they contract with CWB."

Fran Malecha, the Viterra chief operating officer, said a tie-up with the board "provides growers with access to the CWB pool programmes for wheat, durum, and barley, and to Viterra's comprehensive logistics network across western Canada".

Viterra is in the process of a $6bn takeover by Glencore, which will then sell on parts of the grain handling operations to Richardson.

South West Terminal, besides Cargill, also earlier this year agreed a handling deal with the CWB.