RECENT developments in the Canadian grain handling industry are challenging forecasts of a business increasingly concentrated and dominated by multinational giants.
Not long ago, the industry was in turmoil, struggling with new market realities. The prairie pools, long the dominant force, were in financial disarray after spending heavily to rebuild their country operations and were desperately seeking restructuring solutions or partners to save them from insolvency.
Giant multinationals such as ConAgra and Louis Dreyfus were increasing their presence, building elevator systems, perhaps in the expectation that the besieged Canadian Wheat Board would lose its monopoly. A host of communities formed farmer-owned companies to build elevators.
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Worrisome drop in grain prices
Prices had been softening for most of the previous month, but heading into the Labour Day long weekend, the price drops were startling.
The tempest subsided, but the survivors still faced unsettled seas. There was a new dominant player, Agricore United, 28 percent owned by Archer Daniels Midland. Saskatchewan Wheat Pool continued to struggle with a heavy debt.
Weather problems shrunk crops, compounding the problems of an overbuilt grain handling system.
Economists speculated that the fragile status quo couldn’t last. Some players, too small or too burdened by debt, would succumb to bankruptcy or take over by multinationals. Farmers worried competition would decline as giant companies gained dominance.
Those forces still exist, but Canadian grain companies are pushing back. Last month, a pioneer stalwart of the Canadian grain industry, James Richardson International, announced it was buying ConAgra’s four country terminals, increasing JRI’s country presence and helping to guarantee its future.
The JRI deal followed a bigger announcement. A consortium of five farmer-owned terminals is buying Agricore United’s 102,000 tonne capacity grain export terminal in Vancouver.
The development echoes the creation of the prairie wheat pools in the 1920s. While the scale and organization are different, creating the consortium and buying the port terminal has recreated a farmer-owned grain pipeline from the prairies to salt water, lost with the disappearance of farmer-owned pools. It opens the possibility of a producer-run exporting company in competition with corporate exporters. This raises hope that the grain industry will remain more Canadian and more dynamic than forecast.
There is much to do, including convincing other farmer-owned terminals to use the facility, but it could inject a new competitive spirit into the industry.
Port terminal operation is traditionally one of the more profitable businesses of the established grain handlers and it might be ripe for a shakeup.
Farmer-owned terminals, built to serve their shareholders, have pioneered services such as trucking incentives, payment for screenings, extended hours and competitive elevation tariffs. If they can bring similar innovation to the port terminal business, prairie farmers will benefit.
