Canada: CWB’s removal will strengthen Viterra - CEO

Removing the Canadian Wheat Board’s marketing monopoly will strengthen Viterra, CEO Mayo Schmidt was quoted as saying by Calgary Herald on June, 9.

“The changes to the monopoly will have a number of important and lasting benefits,” he told analysts on a conference call. “The industry should have more flexibility and leaders like Viterra will be able to maximize logistical capabilities and improve efficiencies with increased throughput, velocity and rail car delivery.

“We believe these changes will result in greater returns for agriculture producers, the industry as a whole and therefore Viterra shareholders as well.”

Schmidt said it’s too early to determine the exactly impact the change will have on margins, but that they plan to participate in the process.

The federal government has announced it intends to remove the wheat board’s monopoly on marketing Western Canadian wheat and barley for the start of the August 2012 crop year, but not exactly how that will work.

Jason Zandberg, an analyst with PI Financial, said opening up the wheat board will be positive for Viterra.

“The real issue is the Canadian Wheat Board tends to allocate who can handle the wheat and barley and their allocations don’t match what market shares dictate in the non-board grains, for example, canola,” he said. “There’s quite a large delta between what Viterra is allocated from the wheat board and what we estimate they would do under a free market system.

“I’d expect them to get a lot bigger market share.”

Schmidt said they estimate between 52 million and 56 million acres across the prairies will go unseeded this year, compared to 52 million last year.

However, he also anticipates that the amount of canola planted could increase by 1.7 million acres, which is good for Viterra because farmers spend between 25 per cent and 45 per cent more on inputs for canola than wheat.

10 June, 2011