NorAg Resources Big elevator companies dominate trade leaving little room for middlemen
As the era of the open market dawned, Doug Hilderman saw a golden sunrise for a bright new cash market for prairie grains.
He thought board grains, freed of their control by CWB, would become aggressively bought and sold by a plethora of small, medium and large marketers and grain companies. This new trade would embrace any new opportunities and make the business more quick and active.
Instead, Hilderman said less grain is being traded than when the CWB monopoly was intact. And rather than providing an opportunity for more grain marketers to enter, the basis of existing players is being challenged.
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“It’s a very poorly defined cash market. There is almost no cash market,” said Hilderman, who sources and sells crops for marketer NorAg Resources.
“It’s not unfolding the way a lot of people thought, not the way a lot of farmers expected. It’s not the way a lot of the industry thought.”
Hilderman said the prairie grain industry is so dominated by three large grain elevator companies and a handful of smaller operators that little room appears to be left for marketers who buy from one company and sell to another.
“It’s like there are three wheat boards out there now,” said a disappointed Hilderman.
“There’s no incentive for a marketer to organize farmers’ grain and sell to a grain company, or buy from a small grain marketer and sell to a big grain company.”
He said the big grain companies appear to want to keep all grain procurement, movement and sales in-house, so it’s often not possible to find bids or offers for anything.
Grain marketers without handling facilities or with only a few facilities have often played an important role in the prairie grain business, either as exporters who find overseas buyers and then arrange delivery or as crop procurers who find on-farm supplies of crops and then find grain companies looking for those supplies.
Accredited exporters often filled a significant share of the sales that the CWB oversaw during the wheat board monopoly era.
With the board monopoly gone, Hilderman hoped last winter to see even more buying and selling between grain marketers and grain companies as everyone embraced the opportunities of the free market and tried to match supplies and demand more aggressively.
It is what he has seen in the United States, where companies buy and sell crops to each other to match the opportunities that each finds.
However, he said some of the players on the Prairies, such as Richardson International, Cargill and Viterra, seem so dominant and vertically integrated that they appear to not need to trade with anyone.
“They buy grain from the farmer, put it through their elevator, send it through their terminal to an export end user,” said Hilderman.
“They don’t buy from other companies and they don’t sell from other companies.”
Hilderman said it is sometimes possible to get bids or offers from the big companies, but they are at levels that make profitable sales impossible.
“There’s no way to make it work,” said Hilderman, whose company operates in western and eastern Canada.
“The big line companies are putting the squeeze on the exporter that doesn’t have any procurement … and they’re squeezing out the guy at the bottom.”
Hilderman said buying and trading crops between companies generally creates value.
Companies don’t need to compete as aggressively with price to attract supply when only a handful of them are bidding for farmers’ grain.
“A farmer doesn’t have a lot of choice,” Hilderman said.
“There’s not a lot of market definition out there. There certainly isn’t a lot of competition out there for a farmer’s grain.”
