Cancom Grain In Receivership

WINNIPEG - May 2/02 - SNS -- Cancom Grain Company Inc. went into receivership this week, with industry sources saying it resulted from losses caused by last year's drought.

There is no information as to the amount of money involved in the bankruptcy nor the number of growers who have not yet been paid for grain delivered under Cancom's grain dealers license.

Cancom was created in 1995 as the marketing arm of Eagle Creek Processing Company Inc. of Rosetown. Though there is overlapping ownership between the two companies, there is no reason to believe Eagle Creek and a sister operation in Saskatchewan will be seriously affected.

However, the grain dealers license used by the companies was owned by Cancom and has been surrendered to the Canadian Grain Commission. Effective May 1, Cancom is not longer listed as a licensed Grain dealer by the federal regulator.

Some industry participants worry that without a recovery in crop production levels in western Canada and a major improvement in marketing margins, the number of companies involved in the industry could shrink further.

These worries are founded, in part, on the discovery that some trading companies which were believed to be backed by hard assets, such as processing plants, only own some office equipment. This is because the trading and processing divisions of the companies were split apart to avoid the risk of trading losses creating liability for the processing company.

Though making good corporate sense, especially with respect to limiting liability, the realization this has taken place could result in companies undergoing closer scrutiny by banks and trading partners. One of the major companies involved in the Canadian industry said they make ask to see copies of financial statements in addition to scrutinizing bank references before agreeing to sell to some industry participants.