The company that played a major role in building Canada’s thriving pulse industry is turning its attention to a cereal crop.
“We’re going to see a durum story unfolding like we saw in the lentil story,” said Murad Al-Katib, president of AGT Food and Ingredients.
AGT acquired Mobil Capital Holdings in October for $57.5 million, which gave it a grain cleaning and loading operation in central Saskatchewan and two short-line railways in the province.
Six months earlier AGT had bought West Central Road & Rail for $22 million, which gave it five Saskatchewan producer car-loading facilities.
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Both firms were active players in the durum business.
“We’ve only talked about (durum) in the last few years, but this was always part of our vision at AGT,” said Al-Katib.
The Arslan family, which co-founded the company with Al-Katib, has a long history of lentil and durum processing in Turkey, and that was always the plan for the Canadian operations.
“We’ve done lentils and now we’re focusing on durum wheat, so that’s the strategy,” said Al-Katib.
“We believe that our market access, our processing know-how and our financing capability is a winning model.”
Durum was the natural next step for AGT because it is grown in rotation with lentils in west-central Sask-atchewan.
Al-Katib said the future is bright for durum because pasta, bulgur wheat and couscous are staples consumed daily in the Middle East and North Africa.
“Their consumption is rising dramatically and their production is stagnant,” he said.
He is also excited about the market potential in Turkey, which is where the company’s pasta plant is located. Turkey is the world’s second largest exporter of pasta.
“We think it’s a really big market for Canadian durum producers. We think that Turkey will become a Top 10 durum export market for Canada in the next five years,” said Al-Katib.
However, it’s not all about exporting the raw product. He believes pasta plants will also be popping up in Saskatchewan and Alberta.
“Whether it’s AGT or other companies, we expect investment on the Prairies to happen.”
One of the main reasons for his optimism is the Comprehensive Economic and Trade Agreement with the European Union, which gets rid of punitive duties on processed products shipped to the EU.
Bill Gehl, chair of the Saskatchewan Wheat Development Commission, isn’t as convinced there will be a thriving durum processing industry.
“Certainly having a pasta plant built in the West would be nice, but I haven’t seen one yet, so I think there are some questions there,” he said.
AGT announced in 2011 that it was going to build a $50 million pulse and durum milling plant and pasta manufacturing facility near Regina. However, it indefinitely postponed the project seven months later due to disappointing earnings.
Gehl thinks there is a flaw in building a plant so far away from large consumption markets like the EU.
“What’s easier to ship around the world, a boat hold full of durum or a container full of macaroni?” he said.
He agrees with Al-Katib that durum has a bright future in Western Canada, but it also has short-term challenges.
“This fusarium issue on durum is a significant one,” he said.
Breeders at Agriculture Canada and the University of Saskatchewan’s Crop Development Centre are trying to breed fusarium resistance into future varieties, but it’s a time-consuming process.
“We’re far further away with durum than we are with wheat,” said Gehl.
It means growers continue to face price volatility in the short-term because in dry years they will have too much quality durum and in wet years there won’t be enough.
