The birth of Agricore United will lead to the death of dozens of prairie grain elevators.
Chief executive officer Brian Hayward said last week the company will slash its network of country elevators from more than 140 to 60 or 70.
“How fast that takes place, whether two or three or five years, we have to sort through in terms of what the market situation is,” he said during the company’s inaugural general meeting in Saskatoon.
Hayward’s comments mark the first time the company has publicly attached a number to its elevator closure plans.
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Ron Enns, managing director of country operations, said the “first cut”, which will reduce the network to about 90 elevators, will happen during the next few months.
Agricore United, created by the merger of Agricore Co-operative and United Grain Growers, operates about 55 elevators that can accommodate 50-car trains. Hayward said those elevators will form the backbone of the new company’s country handling system.
“In the long run, Agricore United will be operating pretty well just high throughput elevators,” he told reporters after speaking to delegates.
The CEO added the company has no plans to build any new high throughput facilities: “I never like to say never, but I think the market is pretty well serviced right now.”
The prospect of closing the elevators generated virtually no questions or discussion among the 242 delegates attending the meeting.
Delegate Bruce Dalgarno of Newdale, Man., said that silence doesn’t mean delegates are happy about the closures. Rather, it’s a reality they’ve come to accept.
“It’s an ongoing process that I think, as a farmer, we’re almost resigned to,” he said after the meeting. “Certainly it’s beneficial to the company but I don’t see where it’s a great benefit to producers.”
The delegates passed a resolution asking the company to sell elevators to local buyers in return for guarantees that any grain collected at those points would be shipped to Agricore United terminals.
The new company has also set out a goal to increase its Saskatchewan presence.
Officials were reluctant to talk about specific plans citing commercial confidentiality. However, Enns said Agricore United might be able to trade elevators with other grain handling companies.
Agricore United has been ordered by the federal competition bureau to sell six or seven of its country elevators, especially in the Edmonton and Peace River regions of Alberta.
Enns said it’s conceivable the company could swap some of those elevators with a firm looking to expand its presence in Alberta, perhaps Saskatchewan Wheat Pool.
Sask Pool officials could not be reached for comment. The pool expects to have about 60 elevators once its closure program ends.
In his speech to delegates, Hayward said Agricore United expects to generate merger-related savings of about $25 million in its first year of business, rising to $53 million by year three.
The country operations division will be the biggest single source of savings. Elevator closures and staff cuts are expected to save just under $10 million in the first year and about $22 million in the third year. However, the savings come at a cost. Hayward said the company will incur one-time merger costs of $47 million in the current fiscal year, including $19 million in severance payments and $14 million in legal, accounting and banking fees.
