IT CAME out of the blue and it could put a new hue on the future of the prairie grain industry.
Saskatchewan Wheat Pool last week announced plans to merge with Agricore United, a position that Sask Pool chief executive officer Mayo Schmidt said would give both companies “a stronger and more diversified presence amidst the growing demands of a highly competitive marketplace.” In effect, the new goliath would handle more than half of all grain produced in Western Canada and command an unprecedented level of concentration in the grain industry.
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With the future of the Canadian Wheat Board in flux and changes likely in grain demand and flow through development of the Canadian biofuel industry, the grain business is poised on the edge of major change. The merger of the largest and second largest grain companies creates potential for industry transformation comparable to formation of the prairie pools more than 80 years ago.
True, industry consolidation has been part of prairie grain marketing for years. The most recent spate occurred when Alberta Wheat Pool and Manitoba Pool Elevators merged to form Agricore, which later merged with United Grain Growers to form Agricore United. In the meantime, the future of the Canadian Wheat Board became a focus and prompted increased Canadian purchases by international agribusiness firms including Cargill, Archer Daniels Midland, Louis Dreyfus and Bunge.
There is irony in this latest announcement, considering that the three prairie pools discussed an amalgamation more than a decade ago and were unable to come to terms. Now the publicly traded companies that replaced the farmer-owned co-operatives might manage the merger that could have transformed the Canadian industry back then.
Had that merger been successful, Western Canada might not have an overbuilt grain system; one that could move 20 percent more grain than it does now. Eliminating that overcapacity is one strategy behind Sask Pool’s hostile offer for Agricore United.
If the merger succeeds, some argue that the resulting consolidation would create a company large enough that, if the CWB monopoly ends, could still provide prairie farmers with a company that could aggressively compete in the international grain trade.
And it would be primarily Canadian owned, an important factor to many.
On the other hand, some argue that such consolidation would put more power into corporate hands, making it even more important to maintain the CWB monopoly and its representation of the collective power of farmers.
Sask Pool’s bombshell has added new foment in these changing times. Though the proposed takeover, if successful, could take months and perhaps years to complete, prairie farmers must consider its implications as they plan for their future.
Bruce Dyck, Terry Fries, Barb Glen, D’Arce McMillan and Ken Zacharias collaborate in the writing of Western Producer editorials.
