Guest post – Larry Weber, Weber Commodities
This is NOT My Idea of PROGRESS…
It is Rain’s 7th birthday today, so I am feeling older again. And cranky. Although I love what I do, I wasn’t born to do this. I was born to be a farmer. It came from both sides of my hereditary equation. I was reminded last week on a blog that I have never suffered like a farmer. It is bullshit, as I endure not being a farmer, everyday. Life’s curves sometimes alter our journey; nevertheless, it was my genetic pool that made my life complex while in Winnipeg. At that time and as it still does to this day, everyone forgets where they came from the minute they walk into a grain company’s boardroom, as an employee or representing their constituents within a Board of Directors. It drove me near crazy then and it still does to this day. From my first expedition at a boardroom table, when the old boys club were aghast that I should even be allowed to speak until I was 40 years old (I was 26 at the time), the first words out of my mouth were “What about the farm?” Ed Conn, who I still admire as the shrewdest canola trader of my lifetime, looked at me and said, “Who cares!” The rest of the room fell silent. 60% of the people around that table had farm backgrounds. After thirty years of witnessing changes to the grain industry, sometimes pleading for change and fighting every opportunity I could for change – sooner or later it had to bite me in the ass. And it has. I don’t always know what is best for you, but I can go to my grave knowing that I always held one entity first and foremost above everything else – and that entity would be farmers.
In 1986, at a rail siding in Dutton, Manitoba, to commemorate the grand opening of an elevator, I had the fortune of being alone with George T. Richardson, who was President and CEO of James Richardson and Sons at the time, one on one, for over 15 minutes. It is not the first time that I had been with him, but he was jovial and inquisitive on this day. I answered most of the questions, and heeded the Hon. Otto Lang’s advice that if you are talking – you are not learning. We danced around protein segregation; the inaccuracies of the new protein machines and the antiquated block shipping system until I had the chance to ask the only question I wanted to. “Mr. Richardson, what is the key to your family’s success?” I remember the answer like it was 2 minutes ago and he delivered it in stately G.T.R fashion with one leg bent and his face slightly tilted. “We surround ourselves with great people. We respect differences of opinion and we plan diligently for the future.” I didn’t miss a beat and replied, “Then why did we build an elevator in the middle of nowhere?” Mr. Richardson didn’t break his stance, but looked me straight in the eye and said: “This area has meaning to our family, and sometimes it is not just about business, Larry, it is about doing the right thing.”
The elevator was a failure. Primarily, it was a poor choice of the first elevator manager, where Walter thought he had to buy everyone’s business and it never recovered. You can only pay for 1CWRS and ship 3CWRS for so long. I did my best to get them extra railcars, including manufacturing grain they didn’t have in store, to burn off shipping penal-ties, but it never worked. I had left Pioneer Grain when the Dutton siding was traded (that should have been a hint for me…) but the “doing the right thing” comment has lived with me to this day.
When I saw Curt Vossen’s quote over the Reuter’s wire this week, I was envious, no, I was pissed off that the rest of the Canadian industry did not subscribe to the same theory that has made the Richardson family so successful. Here is the quote responding to a question revolving around if anyone had courted Richardson’s grain empire: “Sure we’ve been a player in that regard. Do we have any intention of responding to those (inquiries)? No, our shareholders have indicated a strong desire to make this a seven-, eight-, nine-generation play, and they’ve got a few more to go.”
When our farming Grandfather’s and their father’s for some, started breaking sod, and building their own businesses over a hundred years ago, they envisioned a healthy Canadian grain industry; one that was controlled by Canadians and farmers and yes, even cooperatively for some. Those torches were passed to the Mac Runciman’s, the E.K. Turner’s and later to the Ted Allen’s and Milt Fair’s. I read a commerce quote at some point and I cannot find it this morning, but the heart of it was that the longer change is stymied, the tighter the coil springs until change rapidly takes place. I’m not going to blame change for this occurrence this week. Nor should you. The demise of the CWB didn’t start this – but it most likely ended it. I will question the fighting over change over the past 3 decades that has made the industry ripe for a takeover. The industry was weak and devoid of farm leadership. Politically, we burned so much energy (and great people) on the CROW, the WGTA, and the CWB, the vision aspect of a healthy Canadian industry has always been second. It is the dreaded chicken and egg conundrum. What really came first?
AIMCo (Alberta Investment Management Corp) was right in November, 2011 and in the previous eighteen months stating that the current Viterra Board of Directors did not have the required skills to meet the Company’s leadership goals. It allowed the hunter (Schmidt) to become the hunted. Selling the heart and soul of our forefather’s blood, sweat and tears for a one time lottery is just another excuse for incompetence.
I stated earlier this week that I would be irritated for some time. This is why. Farmers took the biggest haircut when SWP fought back from bankruptcy. Farmers had little to no say into the transformation of Agricore to Agricore United and then AU to Viterra. Farmers had little to no say after Viterra was formed save for an optical illusion called the Farm Leadership Council which has now morphed into a Seinfeld pilot. So when Mayo Schmidt walks away later this year with his 37 million tucked into his money belt, and the Board of Directors walk with their million dollar payouts, who at the table, asked the one question that will keep me up for a very long time: “What about the farm?” And who at that table put greed and fiduciary duty aside long enough to ponder this: “sometimes it is not just about business, it is about doing the right thing.” Your forefathers are right now, beating the tops of their coffins; however, the silence from the farm is deafening. Just like the Ed Conn example above, that silence says everything….
Larry, you may correct me if I’m wrong here but it appears you are being critical of Mayo Schimdt? Without Mayo there would be no Viterra and no share value left of any kind from the Sask Wheat Pool days. I think Viterra shareholders need to remember Mayo when they make out their Christmas lists this year because Mayo was handed a lemon and he made something from it. When the grain marketing monopoly began 69 years ago there were 125 thousand farms in Sask. If you want cause and effect I know where I would look.
Gee, that should get him some sympathy business. After all, he’s a wannabe farmer “who does the right thing”. Has the best interest of farmers at heart. Where have we heard that before?
But doing the “right thing caused the elevator to go broke.”
Someone needs to elborate on this because the letter seems to ramble. Is the writer pissed that the CWB is gone so the farmers are now getting screwed or that the farmers have always screwed because of the wheat boards.
Anyway the example of the elevator to
nowhere is not a good medifore for doing the right thing.
Good comment.
I grew up on a dairy farm,
and was taught *work* at a very early age.
up at 4 am,
work-milk 47 cows until 7 am,
go to school,
I loved getting a break going to school.
Back home at 3:30 pm- work till 9 pm,
shower, study, fall/collapse into bed and start all over again the next day- 7 days a week.
Then the Government/Monopoly dairy farms put us out of business.
Pure cow milk could not be sold/put in jars.
Inspectors would dump all our milk because of one hair.
Now they ship Brazilian milk to China put lead in it and ship/sell it back.
Milk water lead is now priced at $4.50 per gallon and is about as nutritious as drinking a bottle of urine.
My point is-
soon your healthy Canadian farm industry products will be sent to China,
they will put lead in it and ship it back..
To all the farmers, my sincere thanks for your hard work and dedication.
But … sorry, I’m a city boy who has made a good living for several decades doing city stuff (marketing; advertising) and I have absolutely NO IDEA what that guy thought he was saying. Is he FOR it (whatever “it” is) or against it?
I love the quote about a spring coil, and frankly I intend to borrow it and use it often when pushing for change at work. But I suspect I’m fairly representative of MILLIONS of educated, informed, engaged city folks who simply have NO IDEA what the hell that post was about.
But, I do know this … free markets ALWAYS prevail in any struggle against “controlled” markets, so if he was saying THAT I get it and agree; if he wasn’t saying that, he’s wrong.
Markets don’t have emotions and don’t care about “doing the right thing”. When ANYBODY ANYWHERE (city or farm) claims to be “doing the right thing” make damn sure they’re doing it with THEIR OWN MONEY and not yours.
“Now they ship Brazilian milk to China put lead in it and ship/sell it back.”
Idle curiosity here, but why does China even import milk on such a scale? East Asians are almost universally lactose intolerant.
Your story of life on the farm sounds like so many others I’ve heard. It’s probably not a coincidence that the West was culturally healthier when it was still largely agrarian.
When ANYBODY ANYWHERE (city or farm) claims to be “doing the right thing” make damn sure they’re doing it with THEIR OWN MONEY and not yours.
Yeah, another expert who knows what’s good for farmers. No shortage of experts…so long as they don’t have to get close to the actual work. Drop a few names and think he’s important…
One question – Why would anyone build an elevator in 1987 when everyone was closing them by then. I am unsure why the prairie wheat pools didn’t choose life instead of selling out. It was as simple as making decisions based on economics not sentiment.
All they had to do was open more regional terminals and close most of the small elevators. It was going to happen anyway. It is an absolute crime that farmers chose not to modernize and compete losing almost all their marketing co-ops.
the West was culturally healthier when it was still largely agrarian.
That’s a dubious statement. Big government is not something new, although it’s nature is changing. However, tolerance towards gays and different races/religions is new amongst other improvements. I see nothing ‘healthy’ about getting up anytime before 7 am.
the West was culturally healthier when it was still largely agrarian.
Quite a bit smarter, as well. They knew you couldn’t make a horse out of a mule.
It is an absolute crime that farmers chose not to modernize and compete losing almost all their marketing co-ops.
Co-ops were always havens for the incompetent.
fiddle-dee
do U know which way to the farm?????
“This area has meaning to our family, and sometimes it is not just about business, Larry, it is about doing the right thing.”
Uh, between that and the remarks about railroad shipping, I thought I was reading an Ayan Rand essay.
I’m sorry, I have no idea what the point of that rant was. Must be one of those “inside baseball” things.
I will note that businesses who spend much time “doing the right thing” instead of making money like they’re supposed to tend to go belly up. That’s the single biggest problem we have with our government, too much “doing the right thing”.
Larry Weber. So whats exactly progress to you? Commodity marketing has always been and will always be market driven, or should you have more boards overseeing everything? I wonder if “farmers” are ever going to be over your recommendation a couple of years ago that Canola would be over $20. a bushel, when any of them could and rightly should have locked in their pricing at $16 or $17.00 a bushel. Lot’s knowing the market was at 16.00, held out for $6.00 waiting for the day it surpassed $20. Remember that?
What is this whole stream of consciousness / moan about? Markets change. Yup. People don’t really have a huge say in the control of boards of directors? Check that box as well. JRI, Cargill, Dryfus, P & H, and all the various others are still there correct? Whats the problem? It’s like reading Nettie Weber, maybe that’s the point.
I am quite familiar with the industry, especially the Farmer-Industry interactions. But I have to say I am not really sure what Mr Weber is trying to convey.
As much as I like Mr. Weber, and the concept of “Doing whats right”,.. he seems to have mixed up the issue somehow.
JRI and Viterra owe nothing to the average farmer beyond service to keep customers and a strong enough base that they will be able to buy from them in the future to continue their business.
As a farmer I am responsible for my own business.
But as to “doing what is right”… Mr. Weber used an example where JRI built a terminal in the middle of nowhere, overpaid prices and grades because they felt they “owed” something to the area. Maybe “they” did, but they did it with the shareholder’s money. Another classic example where “doing the right thing” depends on which group you reside in. Was it the “right thing” for the shareholders??
The same sort of thing happened when they tried to set up an ethanol plant in my area. Wanting to “do the right thing” the last capital raise was to include a floor price and a guaranteed tonnage buy for 5 or 10 years from the farmers who invested.
A good deal right? for a few people.
Many of the farmers who had invested earlier in the offerings pulled their investment.
What the company tried to do was offer incentive, but all they succeeded in doing was advantaging some at the expense of others,… and the company itself. That offering was the end of the company.
“Doing the right thing” is seldom so black and white. If I was a viterra shareholder, I might be annoyed that the board and Schmit walked away with 50+ mill between them. At least until I remembered that the share price bought into at the start more than doubled in time for the sale… an average 30+% gain a year just as viterra???? Not to mention SWP and agricore were on the verge of going under when Schmit took over?? They weren’t alone in making money on the deal.
Your post is based on “Farmers need”; input into their customers, a say in who (not just buys what they are selling, but who is allowed to be there??) is allowed to buy from them.
How is it that you can argue against the CWB control, and the farmers partial control of it. But still argue that they need the control of a company like SWP, Agricore, Viterra??
It is the same in every market; the grunts do all the work and the traders take a disproportionate share of the wealth. The system works to the extent that it benefits all in the long run but some of those benefits are dubious and the costs are sometimes appalling. Weber’s ambivalence is appropriate.
It is the same in every market; the grunts do all the work and the traders take a disproportionate share of the wealth. The system works to the extent that it benefits all in the long run but some of those benefits are dubious and the costs are sometimes appalling. Weber’s ambivalence is appropriate.
1talkinghead:
I wonder if “farmers” are ever going to be over your recommendation a couple of years ago that Canola would be over $20. a bushel, when any of them could and rightly should have locked in their pricing at $16 or $17.00 a bushel. _________________________________________
Cash canola has never been at $16 or $17.
The highest cash canola in Saskatoon since 1982 has been $14.30.
It was flax.
Posted Jan. 10th, 2008
Western Producer.
The analyst forecast prices in the coming year of $15 to $20 per bushel with normal to good weather, but more than $20 if conditions are dry.
_____________________________________________
Flax on January 10, 2008 was $12.86
Flax hit $20.00 a bushel on July 16, 2008.
Don’t let facts get in the way of the voices in your head tho…
It is not another huge Global grain, ect handler Canadian Farmers should be afraid of. It is the culture that has infected farm gate sales.
With “help” from University Ag departments, Farmers gave up control over the sale of their grain products starting in the 1970s.
When grain handling companies saw the consolidation writing on the wall they knew elevator ‘storage’ capacity would decline dramatically. aka high through put elevators. It would be a more efficient elevator system but they would have to devise a way to lock-in farmer deliveries. With drastically lower elevator storage the companies would not be able to count on a third of the harvest (harvest rush) no matter what the grain price, grade, dockage they offered. Once the farmer’s bins were full they had to deliver or pile it on the ground.
Enter ‘Deferred Delivery Contracts’ and ‘Basis Contracts’ and ‘Production Contracts’ all under the guise of ‘lock in a price’, lock in a profit. Sounded good but what it did was transfer the risk on to the Farmer. (Not blaming the companies -business is business – but why were the ag economic professors so game to push them as a default position?
Farmers were now “free” to price their crops before they were harvested, before they even seeded them. Yes, good move if prices subsequently fell, no if higher. But the farmer was on the hook if he had a crop failure and prices were higher than his lock-in price. He had to now write a check for the difference. It is possible to hedge directly on the exchanges and bypass the contracts but now the farmers are playing long and short with the Big Boys – scary.
Contrast the above with the few farmers who have built up cash reserves and erected enough storage for their whole crop – or two years worth of crops.(I know some) Seldom does a year go by without some period of profitable grain prices. Two years and you have a very good chance of very profitable prices. I can imagine no better joy than delivering physical grain against the $20 a bushel ‘longs’! Lots and lots of tonnes. But bins cost lots? Yes, but they last a life time.
Their are only two reasons a Farmer sells grain for a poor price – needs the money or needs the storage room.
If a farmer is truly in control of his product it matters not if he delvers to Big Grain or co-operative or high through put grain auger into a rail car. But if he is on a DD contract hook he is committed. Especially if it is a ‘production contract’ and there is no production (crop) and he owes the grain handler big bucks for crop inputs. Short & curlies
SDA readers would understand Larry better if he weren’t so polite.
Glencore, the initiator of the Viterra takeover, was started by Marc Rich. A quick internet search will drown you in commodity trading malfeasance that only Corzine can come close to matching. But officially that’s all gone now because he gave a wad of cash and Clinton saw fit to pardon Rich on his last day in office.
For those not in agriculture, Larry might not have been clear. But for those who farm, learn who you’re dealing with. It’s easy to be mindful of the importance of buying quality, but I think it is also important to consider factors beyond dollars and cents when selling.
Barcs, I may be wrong, but I believe JRI is privately held, FWIW.
All I know is if not for Farmers we would starve. Industrial farming never lasts historically.
You need a healthy civilization for that, & ours is quickly disappearing.
Industrial farming never lasts historically.
It’s been tried once and it’s doing just fine.
Well, anybody who quotes the wisdom of the likes of Otto Lang is a few bricks short of a load.
Sask wheat pool shares went through a twenty for one reversal.
for every dollar invested, they turned into nickles.
course, if you knew it was comeing and jumped out at the right time….someone made off pretty good.
in my opinion thats where mayo and crew got the money for viterra…..off the backs of farmers equity…
pool was dead broke and then all of a sudden they had money to buy agricoreunited, then agricore and then to viterra.
and now mayo is about to walk away with 37 million.
my opinion of mayo isn’t very high!
but i do believe he had help, high up help!
he will likely have to split that 37 mill.
this whole deal stinks to me.
the old saying you can smell a rat comes to mind.
jmo.
“Your forefathers are right now, beating the tops of their coffins; however, the silence from the farm is deafening. Just like the Ed Conn example above, that silence says everything….”
And just what were farmers supposed to do, were the delegates of the old SWP ever listened to. It’s been top down dictatorship for a very long time.
“in my opinion thats where mayo and crew got the money for viterra…..off the backs of farmers equity…”
When Schimdt came to Sask Wheat Pool in 2000 bankruptsy was close at hand and there was very little working equity left. Don Loewen had been forced out after the huge expenditure on concrete elevators. Yes the shares were diluted but what other choice was available at the time.
what other choice did they have.
ya, can’t sell it yet, the scam isn’t complete.
they had to get the money out of the farmers pockets and into theirs.
this whole thing has been a scam from the start imo.
mission accomplished mayo.
Old communists still smarting over what their system did to them. lol
“..Farmers had little to no say into the transformation of Agricore to Agricore United and then AU to Viterra. Farmers had little to no say after Viterra was formed save for an optical illusion called the Farm Leadership Council which has now morphed into a Seinfeld pilot…”
But they could have. They have the same disease most other Canadians have: they sit quietly at home hoping that the creeps, the dullards and the crooks who they put in charge of things will keep things in order.
But every one of those farmers knows that you don’t give 8 year olds a book of matches and leave them alone in a barn full of straw.
Funny that. I guess vigilance has its limitations.
I’m not trying to be argumentative Bygeorge but remember: By the early 1990’s the number of farmers that were ready to retire and pull their equity out of the old Co-op(Sask Wheat Pool) made the company unsustainable, hence the conversion to shares long before Mayo arrived. The share price reached a high of 24.40 in 1998 and crashed to as low as .20 by the early 2000’s. The 2003 470 million debt restructuring was precipitated by many bad business decisions, like investments in Poland, Mexico, and England but there was no scam. Sask Wheat Pool only escaped bankruptsy by the narrowest of margins.
Well Nold, were gonna have to agree to disagree.
when the folks who built the place leave with nothing and the johnny come lates leave with millions…..thats a scam.
pool should have been sold at bankruptsy, and the money, what was left of it given back to the shareholders.
the big boys didn’t want to do that…….the scam wasn’t yet complete….
Bygeorge, right you are. I guess the 64 dollar question remains; how much money was there left in 2003 to give back to shareholders if bankruptsy had proceeded?