February 22, 2008

 

Investment Saskatchewan seeks exit from hog business

 

 

Investment Saskatchewan Incorporated is looking to sell its majority stake in swine business at Big Sky Farms Inc., in Humboldt, Saskatchewan, according to a Saskatchewan Party official.

 

"It is part of our medium-term plan to sell this asset (Big Sky) when taxpayer returns can be maximized. That is our goal at the present time," said Lyle Stewart, Saskatchewan's provincial minister of enterprise and innovation. "It's certainly not our intent to be the majority shareholder for long."

 

Big Sky Farms is one of the largest hog operations in Canada, with roughly 50,000 sows in production. It owns 44 production units in Saskatchewan, and three more in Manitoba.

 

The province's involvement in Big Sky Farms began in 2000 under the government, which was headed by the New Democratic Party at the time. Investment Saskatchewan, a Saskatchewan Crown corporation, decided to invest in the expanding hog production company. Its investments in Big Sky as of December 31, 2006, were valued at C$29.3 million, making it the majority shareholder.

 

Stewart said he didn't know what the original rationale was behind the government's decision to invest in Big Sky, nor did he wish to speculate as to whether or not Investment Saskatchewan intended to become the majority shareholder.

 

"We don't think investments like this are good homes for taxpayers' dollars, but in any event, the previous government made the investment and we hold the asset now," Stewart said.

 

He also said talk about selling Investment Saskatchewan's share in Big Sky was already taking place under the previous government.

 

"Things have changed," he said. "It is my understanding that even the previous government had been looking at disposing of this asset when the time was right."

 

Asked if there are parties interested in purchasing the province's share in the company, Stewart said the government wasn't actively looking for buyers. He said instead that the government would wait until it felt taxpayers would receive a good return on the investment.

 

"Maybe when prices turn around and the futures markets suggest they might this summer, that would be the time to start the search," he said.

 

Stewart said that because of the crisis currently facing the hog industry due to high feed costs, a strong Canadian dollar and low hog prices, offers made at this point would likely be below market value. He said the government wasn't interested in "low-ball offers."

 

Critics of Investment Saskatchewan's role in Big Sky are expected to welcome the news. Jim Long, of Genesus Genetics in Oakville, Manitoba, recently called on the Saskatchewan government to "get out of hog production."

 

"It's bizarre that the government would be competing with basic agriculture. It's wrong and socialistic," Long said.

 

Long also questioned Big Sky's business model of sending weanling pigs to the US to be fed and finished, saying that it didn't match Investment Saskatchewan's stated mission "To support the growth of the provincial economy by investing in Saskatchewan businesses and achieving a risk adjusted return on those investments."

 

"The original business model was to produce pigs in Saskatchewan, to feed them there," Long said. "Now their business model is moving them to Iowa to finish. How does moving a 12-pound pig to Iowa benefit Saskatchewan? A pig eats approximately 80 percent of its feed from 12 pounds up. How does taking 80 percent of the feed utilization to Iowa help Saskatchewan producers?"