Saskatchewan Wheat Pool In A Global Market

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Saskatchewan Wheat Pool In A Global Market

• Terry Harasym
• Saskatchewan Wheat Pool
• February 18, 1999

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Globalization

• Forcing business to rethink the way business is
  done
• Creating a new playing field
• Rules are being rewritten as the game is being
  played

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Globalization

• Global trade requirements
• Integrate along supply chain
• Biotechnology
• Deregulation

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External Forces

• Acting Concurrently
• Companies and Cooperatives will need to
• increase efficiencies,
• reduce costs,
• seek value through acquisitions, mergers and
  strategic alliances.

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Integration Along The Supply Chain

• New and complex relationships
• Advances in biotechnology
• Paradigm shift in agribusiness
• Consolidation of technology companies
• Integration of Ag. RD and Agri-Food Processing
• Integration of Ag. RD and Chemical RD
• Linkage of RD and distribution of agricultural
  products.

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Biotechnology - Challenges

• Market and consumer acceptance
• International Agreements - Lag advances in
  Biotechnology.
• Without trade and regulatory rules, barriers will
  be erected that restrict market access for all
  Canadian grains and oilseeds.

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International Trade

• Uruguay Round
• modest disciplines on export and domestic
  subsidies
• nominal access gains
• Agriculture Ministers Meeting
• Export target of 4 of world agri-food trade by
  2005.

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Next WTO Round - Objectives

• I. The complete elimination of export
• subsidies.
• II. Reductions in production influencing
• domestic support levels.
• III. Additional and more secure access to
• international markets.

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Canadian Agriculture

• The Last Decade
• Producers have exported more at a great value
  than any time in the last decade - higher cash
  receipts
• Farm Income - Marginal Increase
• Governments Program Payments - Declined
  Substantially

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Realized Net Farm IncomeSaskatchewan, 1986-1998
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Saskatchewan Agriculture

• Drivers of Change
• Rail deregulation - branch line abandonment
• Elimination of grain transportation subsidy
• Government program payment reductions

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Producer Response

• Seeded acreage shifts (last 5 years)
• Durum Wheat ? 102
• Flax ? 112
• Canola ? 35
• Oats ? 68
• Barley ? 3
• Rye Unchanged
• Spring Wheat ? 36

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Producer Response (2)

• Seeded acreage shifts (last 5 years)
• Specialty Crops ? 71
• Summerfallow ? 26
• Cattle ? 10
• Hogs ? 5

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Industry Changes

• Acceleration of value added processing
• New entrants in grain business
• Consolidation of grain companies
• CWB Changes
• Governance
• New Powers

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Conclusions

• Shifts are occurring in Canadian and World
  Agricultural Sectors
• Changes are rapid and discontinuous
• Changes are driven by
• Globalization
• Industrialization
• International Trade Agreements
• Domestic Deregulation
• Government Fiscal Restraint

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Challenge

• All parts of the Canadian agri-business
  industry from producers to processors- including
  cooperatives - will need to be competitive
  internationally and domestically - while
  maintaining consumer confidence in agriculture
  and food safety.

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Saskatchewan Wheat Pool

• 1924 - Focus was simply to market unprocessed
  grain.
• 1999 - Publicly Traded Co-operative with over 4
  billion in annual sales.
• 1999 - 25 associated companies

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Our VisionGrowing Global . . . Growing Together
Our Mission To be the most dynamic agri-business
co-operative in the world
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Strategy

• 1.Renew our core grain handling capabilities
• 2.Invest in integrated agri-businesses that
  generate opportunities to add value to products
  grown by our farmer-members.

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• Investing 270 million in its country elevator
  system
• Largest capital expenditure in Western Canadian
  agriculture
• Closures of old inefficient elevators will
  challenge SWP to provide services and add values
  to members
• Approximately 200 elevators will provide first
  class service and products to members.

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Saskatchewan Wheat Pool - a public traded
co-operative - April 1996
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Financial Restructuring

• Intense competition, deregulation and
  globalization
• Diversification program requires funds
• Repay debt assumed in the past
• Redemption of Members Equity

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The Process of Equity Financing

• 1. Members must retain control of their
  
• co-operative.
• 2. Develop programs to encourage share
• ownership by members and
• 3. The Pool must have the ability to raise
• new capital

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The Process of Equity Financing

• Democratic Structure to remain the same
• Two classes of shares
• Class A Voting Shares (held only by farmer
  members)
• Class B Non-Voting Shares

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Impacts of Going Public

• What has changed?
• The Pool is financially stronger
• Access to capital markets
• Adhere to requirements imposed on all publicly
  traded companies
• Devote considerable time communicating with the
  financial community
• Members can leave the Co-operative
• Disclosure of information controlled

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Impacts of Going Public

• What has not changed?
• Members control their Co-operative
• Still a Co-operative following the Co-operative
  Principles
• Active in agricultural policy
• Proceeding on our chosen course of becoming a
  global, agricultural Co-operative

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The 21st Century
The 21st century will challenge
co-operatives to find new and innovative ways to
provide their members with increased value.
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Saskatchewan Wheat Pool In A Global Market

• Terry Harasym
• Saskatchewan Wheat Pool
• February 18, 1999