A bid by prairie farmers to buy a grain handling terminal at Vancouver has run aground.
And that has sounded alarm bells among grain industry observers about the ability to inject new competition into the grain handling business.
“I think there’s a big issue here in terms of whether we can have a truly competitive market at the West Coast,” said University of Saskatchewan agricultural economist Richard Gray.
The federal competition bureau has refused to give Terminal One Vancouver and Agricore United more time to conclude a deal reached in May to sell AU’s export terminal to the consortium of five farmer-owned inland terminals.
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In response, AU has filed an application to rescind the original order issued by the bureau in October 2002 directing it to sell the export facility to boost competition at the port.
Last week neither company would say the deal is dead.
“We’re certainly surprised and disappointed, but it doesn’t mean we can’t complete the deal,” said Terminal One spokesperson Garth Gish.
The company’s board of directors was to meet this week to determine its next move.
Murdoch MacKay, AU’s vice-president of operations, said his company is prepared to have further discussions with Terminal One.
“There are a lot of balls in the air at this point in time,” he said. “I wouldn’t write anything off.”
The terminal was originally supposed to change hands Aug.1, but that proved overly optimistic.
Terminal One’s biggest challenge has been to bring new partners on board to ensure the terminal handles enough grain to make it profitable.
The five consortium members can generate about 500,000 tonnes of grain a year, but the facility needs at least 1.6 million tonnes.
A number of small grain handlers have expressed interest in joining Terminal One, but they are all bound by existing handling agreements with the four big companies that control the port’s terminals – AU, Saskatchewan Wheat Pool, Cargill and James Richardson International.
One consortium member said it’s frustrating that the companies that now control the port can effectively scuttle the Terminal One project simply by refusing to release anyone from existing handling agreements.
“The competition bureau has the ability to influence that, but they have chosen to do nothing,” said Jim Major, manager of Great Sandhills Terminal Marketing Centre at Leader, Sask.
Gray said the addition of a new farmer-owned player in the port terminal scene would help keep a lid on grain handling charges, to the benefit of all farmers, but the big four companies are intent on retaining a stranglehold at the port.
“The competition bureau should definitely look at some mechanism whereby these captive local terminal operators could shift some of their business,” he said.
Gaston Jorre, senior deputy commission of competition at the bureau, declined to comment on the anti-competition allegations. Jorre also declined to provide a reason for the bureau’s decision to refuse a time extension to Terminal One and AU.
However, he did say the bureau will oppose AU’s application asking for the original sale order to be rescinded.
“We think there is still a competition issue at the port and the solution to that continues to be the sale of the terminal,” he said.
Under the original order, if the terminal is not sold by an undisclosed date, a trustee is appointed by the bureau to negotiate a sale. In its application AU asked to have that date extended.
The application will be heard by the federal competition tribunal, an independent, quasi-judicial body.
The competition bureau has until Sept. 10 to file a response.
Major, who was instrumental in putting together the Terminal One consortium, said it would be a big loss for farmers to miss a rare opportunity to secure a presence at Vancouver.
“We’ll continue to work at this and see what we can do, but if they don’t co-operate and we’re done, then it’s unfortunate for the whole industry that there won’t be another option out there for everyone,” he said.
