With companies like United Grain Growers boosting their asset-backed commercial paper operations, securitizations done by Canadian grain companies are on the rise, according to sources close to the industry.

As for UGG, the company runs a two-part, dual conduit securitization program, unique to the grain growing markets. According to John Millen of Toronto Dominion Investments Ltd, UGG's $300 million securitization program is typical of a whole industry of "grain companies" selling into commercial paper facilities. TD Investments currently holds $10 billion in its farm receivables conduits.

"We're securitizing what we call farm receivables," said UGG Chief Financial Officer Peter Cox. "[These] are the receivables of farmers in respect to their purchases of seed, fertilizers and chemicals from UGG."

UGG's second securitization program is based on the wheat grain after it's grown. UGG acts as an agent of the Canadian Wheat Board Inventory, a government agency that controls the flow of wheat grain in Canada, according to Cox.

"Whenever we buy the grain from the farm," said Cox, "we expect to receive money from the board."

The Wheat Board conduit, which removes the grain inventory from UGG's books, is managed by Royal Bank of Canada.

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