It is tempting to see Bunge’s recent acquisition of Viterra as the end of the farmer-owned grain co-operative era, but that era ended a long time ago.
Saskatchewan Wheat Pool’s conversion from farmer-owned co-operative to publicly traded company in 1996 was the first step in that direction. The pool’s 2007 acquisition of Agricore United, itself a merger of grain co-ops, and their reorganization as Viterra was a smaller step.
However, the purchase of Viterra by Swiss commodity trader Glencore in 2012 definitively ended the influence of farmer-owned grain co-operatives.
Now American multinational Bunge is acquiring Viterra.
This deal has nothing to do with the demise of Western Canada’s once formidable farmer-owned grain companies, but there is reason to worry about the potential effects of increased consolidation in the prairie grain handling sector.
The new company would be worth about US$34 billion, putting it at the same level as Cargill and Archer-Daniels-Midland.
Viterra owns 59 grain elevators, eight special crops facilities, six port terminals and two oilseed processing plants in Canada.
According to Bunge’s website, it operates four crushing plants on the Prairies and is building another one, and also owns five vegetable oil refineries.
Bunge doesn’t list any Canadian grain elevators or export terminals as assets, but it does own 25 percent of G3, which operates 19 Canadian grain elevators and either owns or co-owns five port terminals.
One farm group expressed concerns a few weeks ago when the deal was first floated as a possibility.
“They would have a very high percentage of (grain) sourcing and export without some divesting,” Jim Smolik, the Wheat Grower Association’s stakeholder relations officer, told The Western Producer before the deal was finalized.
He was particularly worried about the combined port facility ownership.
“That would be a very big concern if they were able to maintain all of their port position,” Smolik said, because it would make it more difficult and expensive for grain buyers that do not have port terminals.
The combined canola crush capacity and elevator network would also be huge, he added.
Consolidation in and of itself shouldn’t be a problem if farmers continue to be served. However, the grain sector requires an environment in which new ideas or approaches can take hold, and that might be difficult with this much consolidation.
As well, will there still be an incentive for the new Bunge-Viterra entity to invest in new infrastructure if it already has so much of it sewn up? In general, less competition is not a desirable outcome.
It’s too early to say whether that will be the case, but it must be on the radar here, just as it is in other countries.
A government source in Argentina told Reuters that the deal is expected to draw regulatory scrutiny, and an antitrust review is also possible in Brazil.
In Canada, the federal Competition Bureau told the Producer a few weeks ago that it would be inappropriate to comment on a hypothetical transaction.
It’s not hypothetical anymore, and our federal regulator must give the deal the appropriate level of scrutiny to ensure that producers’ well-being is front and centre.
Karen Briere, Bruce Dyck, Barb Glen and Mike Raine collaborate in the writing of Western Producer editorials.
