Spring
2016
Grains
West
22
Selling Agency. The three provincial
groups became known as the Wheat
Pools, and each set up a fund to build
its own elevators. The SWP took over
its predecessor, the Saskatchewan
Co-operative Elevator Company, in 1926.
Thanks to an aggressive buying and
building program, the three Pools grew
from just 100 owned elevators in 1925-26
to 658 elevators in 1927.
The Pools and their Central Selling
Agency were successful for several years
during the 1920s. Through pooling
accounts, farmers received the same
price regardless of the time of year they
sold their grain. All ran well until farmers
reaped a poor-quality wheat crop in 1928
and grain prices began to fall in 1929.
With the Pools running into financial
difficulty, the federal government
stepped in to dissolve the Central Selling
Agency and create the Canadian Wheat
Board (CWB).
With the CWB marketing wheat, the
three Pools and United Grain Growers
operated as farmer-owned grain
handling companies.
WHAT CAN GOWRONG?
While all the Canadian Prairie grain
handling co-operatives went through
business structure changes starting in the
1990s, Fulton points to the example of
the SWP to explain what can go wrong
with co-operative management. In a
paper on the restructuring of the SWP
prepared for the
Journal of Cooperatives
,
Fulton said that if the board of directors
isn’t paying close attention it can lose
control of management, and that’s when
mistakes are made. Expansion plans can
be excessive, including paying too much
for new acquisitions.
“From 1996 to 1999, the
Saskatchewan Wheat Pool invested in
approximately 25 acquisitions and long-
term debt grew five-fold. This spending
stemmed from a belief of urgency,”
Fulton said.
Under the direction of CEO Don
Loewen and executive vice-president
Bruce Johnson, SWP embarked on
“Project Horizon,” a massive rebuild
of its elevator network in 1997 with the
construction of 22 inland terminals at a
cost of $270 million. The company also
made ill-fated investments in Poland and
Mexico. While Project Horizon gave SWP
the most modern handling network in
Western Canada, the crushing debt load
and a share price that tumbled from a
peak of $24.40 to a low of $0.20 left the
once powerful company teetering on the
brink of bankruptcy by 2003 and then
again in 2005.
The Pool believed that it needed
to “move rapidly to beat the U.S.”
and it needed to “become more of
a global player and expand beyond
Saskatchewan borders.”
There was a conviction that if the
Pool did not “stay at a significant size…
it would become one of two things:
irrelevant or sucked up.” Interviewees
recalled how Pool management and
board members arrogantly believed the
Pool could become “the ConAgra of the
North” and become “one of four or five
top grain companies in the world.”
“In short, SWP succumbed to the
two classic problems associated with
financial investment activity, agency
(board/manager control) problems
and management overconfidence.
The result was as expected—the
Pool overinvested and made poor
investments, the consequence of which
was that its financial viability was severely
challenged. What started as an attempt
to keep the SWP competitive in a rapidly
changing market ended with SWP
making bad business decisions, which
in turn resulted in the loss of the Pool’s
co-operative structure.”
CO-OPERATIVE OUTLOOK
Learning from the lessons of the SWP
and other co-operatives around the
world, Fulton said he still has faith in the
co-operative system.
“I personally think there is still a role
for a farmer-owned grain handling co-op
in Canada,” he said. “Grain handling
co-ops play a very important role in
the United States—in fact, it could be
argued that they are now the dominant
player at the grain handling level. And
EXPANDED OPERATIONS:
The Saskatchewan Wheat Pool expanded operations in 1949 to
include a flour mill, and began shipping to consumers shortly thereafter.
