Farmers fought long and hard to create the Saskatchewan Wheat Pool in 1924, but 88 years later the company, now known as Viterra, is being sold to a Swiss-based multinational called Glencore for $6.1 billion. This is a sad story, a kind of morality tale about the gradual destruction of self-help, local initiative, community control and co-operation. With a few exceptions, there has been virtually no critical media analysis of this event that looks at it from the bottom up. So, as someone who grew up in a small prairie village where the Wheat Pool elevator and the local Pool committee were fixtures, let me offer some observations. I’ll begin with an anecdote.
I co-hosted CBC Radio’s morning show in Saskatchewan in the 1980s. One day I did an interview with E.K. (Ted) Turner, a farmer who served for many years as the Pool’s president. A disgruntled Pool member had provided me with information about an impending increase in Turner’s salary to something like $120,000 per year. The farmer thought this was outrageously high. I asked Turner about it in the interview (I admit it was a bit of an ambush) and he was clearly taken aback. That salary today, if one accounts for inflation, would be about $250,00 per year.
Let’s fast-forward 25 years. The Pool is no longer a co-operative but rather a corporation whose CEO is Mayo Schmidt, originally from Kansas. The Globe and Mail reports that Schmidt stands to pocket an estimated $37.5 million from the sale of the company. This compensation arises from a formula that relates to his salary, incentive awards, and stock options – all provided to him by Viterra’s board of directors. Ten of those directors stand to gain a total of at least $15 million, and three senior executives of the company (other than Schmidt) will go the bank with a total of $20 million. Nice work if you can get it. But how did it come to this? How did the Saskatchewan Wheat Pool, a locally owned co-operative, become a corporation that has now been sold to a giant multinational?
Let’s go back in time. The Pool was created in 1924 because tens of thousand of farmers believed that they were at the mercy of the private grain traders, banks, and railroads. The Pool was organized as a co-operative owned and controlled by its farmer members through a grassroots democratic structure. Anyone who delivered grain to the Pool was a member of the co-operative by virtue of that delivery, and profits were returned to farmers by way of dividends.
Each community with a Pool elevator, and that was virtually every community, had a local Wheat Pool advisory committee, and from that group delegates were elected to a district committee that in turn elected members to the board of directors. When the Pool held its annual convention, hundreds of farmers would descend upon Regina to debate and vote on all manner of resolutions. The convention was often described as a “farmers’ parliament” and ministers from the provincial and federal governments were sure to be on hand to explain themselves.
The Pool was one of the biggest players in Saskatchewan’s economy but it was also enmeshed in the local and provincial community. I recall my father telling me that as a young man he borrowed books from the Pool’s traveling library. He would order them at the local elevator agent’s office and when the trunk load of books arrived he would pick up his cache to devour on long winter nights.
By the 1990s, the Pool’s managers and (yes) its farmer presidents had big plans for expansion. They believed that they needed access to larger amounts of capital than they could raise through earnings that were retained rather than being paid back to farmer members as dividends. In 1996, the Pool’s leaders turned the co-operative into a publicly traded corporation on the Toronto Stock Exchange. To do so, they had to convince their members that, somehow, they would retain control. The move went ahead, but only after much controversy and a failed lawsuit on behalf of members who saw the writing on the wall.
The newly minted Pool promptly embarked on a disastrous series of failed expansions – port terminals in Mexico and Poland, doughnut shops and even fish farms. The company was soon awash in debt and teetering on the brink of bankruptcy. Mayo Schmidt came aboard in 2000. He shed 1,000 employees, sold off assets, and returned the Pool to the core grain handling and related activities that it had performed successfully prior to its misadventures. Soon he began to purchase other prairie grain companies and by 2007 the Pool, now called Viterra (a plastic word if ever there was one), was the largest grain handling company in Canada.
Early in 2012 Viterra acknowledged that it had received “expressions of interest” from parties interested in buying the company. Swiss-based Glencore offered $16.25 per share, a hefty premium of 48% over Viterra’s existing share price. The temptation to sell – if you were an officer or shareholder of Viterra – must have been overwhelming. Schmidt described the sale as “creating value” for all parties, including shareholders, farmers and their communities.
Well not necessarily. Shareholders, officers and board members have hit the jackpot. But it’s more difficult to see what farmers, communities and the province will get out of this. The old Pool did a completely adequate job of collecting and handling farmers’ grain. It’s co-operative model also provided a community presence that is a non-starter for globalized agri-business corporations. Companies such as the current day Viterra, not to mention Glencore, are neither truly democratic in structure, nor community based.
Glencore claims that it will keep Viterra’s head office in Regina but there is an open question as to where the most important office functions existed even under Schmidt’s reign. A November 8, 2011 in article in the Globe and Mail described Viterra as a “Calgary-based company.”
In the same month, a disgruntled Viterra shareholder from Regina asked in a letter to the local newspaper where the real headquarters of the company was located. He also asked why the Americans (including Mr. Schmidt) hired to run Saskatchewan-based companies “don’t like to live here” – an apparent reference to rumours that Schmidt lived mostly in Calgary and not Regina.
A few contrarians
Most journalists and commentators think the sale of Viterra is a fine thing. But there are a couple of contrarians. One of them is Eric Reguly, who writes for The Globe and Mail out of Rome. “What a shame,” Reguly writes. “[Viterra] and its investors are happy to sell too quickly in yet another case of greed-driven, short-term Canadian thinking.”
Reguly goes on to say: “The point is that Viterra is irreplaceable, certainly within our lifetime. Glencore is nabbing 63 grain elevators and seven port terminals in Canada that could not magically be built over night should another group of investors decide to clone Viterra.”
Investment Canada must decide whether this buyout is in the best interests of the country. Commentators are predicting that the Conservative government will not oppose, and the Prime Minister has implied as much in recent comments.
But Bruce Johnstone, writing in the Regina Leader-Post, is calling on Saskatchewan’s Premier Brad Wall to tell Ottawa to block this takeover, just as the Premier insisted (successfully) that the federal Conservatives block a previous bid to purchase the Potash Corporation of Saskatchewan.
Johnstone says the takeover is a bad deal for Saskatchewan, for farmers, and for Viterra’s employees. He predicts that despite promises to the contrary, Glencore will probably nix Viterra’s 400 office jobs in Regina. “With that in mind [Premier] Wall should feel no embarrassment in pleading the case to keep Viterra whole, rather than carved up like a turkey at Thanksgiving,” he writes.
No doubt many would think it quaint that my father once borrowed his library books from the Saskatchewan Wheat Pool; or that each country elevator had a local Pool committee that funneled delegates and resolutions into an annual convention dubbed a farmers’ parliament. In fact, a lot of movers and shakers may think that democracy, too, is quaint and that there is, in the oft-quoted phrase from Margaret Thatcher, no such thing as community. Don’t let them get away with it.