The grain trade has been a strong part of Winnipeg’s downtown economy
for decades but
recently, its role has diminished – a situation that is affecting the
makeup of
the city’s downtown core.
Because of overbuilding in the early 20th century and the size of the
city economy, it has always been easy to get office space near Portage
and Main.
Today, those vacancies in the city’s downtown core are becoming even
more common.
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A few growing companies like CanWest Global and MTS are picking up some
of the slack but there are no large industries moving in to take the
grain industry’s place.
Arason said there’s still a solid core of grain industry expertise that
ensures Winnipeg will continue to be the centre of the Canadian grain
trade.
“The Canadian Grain Commission’s still here,” Arason said.
“The Canadian Wheat Board’s still here. The Winnipeg Commodity Exchange
is
still here. It’s still an important rail transportation centre for both
railway companies.
“That core, that anchor, is still here.”
That was the key reason Agricore located its headquarters in Winnipeg
rather than Calgary, Arason said.
“Being close to the board and the commission and the commodity exchange
and all the support around that was vital.”
The presence of Canada’s most influential marketing and regulatory
agencies has meant that few major players in the Canadian grain trade
have chosen to locate outside of Winnipeg.
Saskatchewan Wheat Pool is based in Regina, Alberta Wheat Pool was
based in Calgary and Louis Dreyfus set up its small headquarters in
Calgary.
But those companies have also maintained an active presence in the
Winnipeg grain trade scene.
Daryl Kraft, an agricultural economist at the University of Manitoba
says grain companies realize significant benefits from maintaining a
presence in Winnipeg, close to agencies like the CWB and the grain
commission.
But that location advantage could be lost, Kraft said, if mergers
continue and the Canadian industry loses the distinctive regulatory
regime that differentiates it from the U.S. industry.
“It’s a made-in-Canada set of regulations,” said Kraft.
“It’s a set of grain standards, marketing protections and grain
transportation regulations that makes it unique.”
Because of the interlocking nature of those standards, grain companies
operating in Western Canada must be well plugged in to the regulators,
railways and competitors.
“Unless you’re on top of them, you’re in trouble,” said Kraft. “You
can’t just sit back and be out of touch.”
Canadian companies have managed to operate successfully inside this
regulatory framework by working closely together and figuring out how
to haul and sell grain profitably within the system.
The complexity of the system has also made it difficult for giant
American multinationals to take over the prairie grain industry.
There was considerable fanfare when ConAgra and Louis Dreyfus set up
shop in Canada in the late 1990s, but those companies do not appear to
be expanding.
Today, rumours persist that ConAgra is ready to back away from Canada
in frustration.
Cargill owns a major grain elevator line in Canada, but that was not an
incursion from outside the country. Cargill bought National Grain Ltd.
from the Minneapolis-based Peavey Company in 1974, preserving the
American-owned, Canadian-based subsidiary that was founded in 1906.
Archer Daniels Midland has also entered the Canadian line elevator
business by taking a stake in UGG and melding it into the new Agricore
United. But this foray into the Canadian system was built largely on
resources that were already established within the Canadian system.
While all this seems to suggest that the western Canadian grain trade
will be forever based in Winnipeg, Kraft said the gradual lightening of
certain regulations could pull out that linchpin.
“As the regulations are slowly whittled away, it will be less important
to be connected,” said Kraft.
“The necessity to be right here starts to decline.”
For example, the erosion of the CWB monopoly would unravel much of the
rationale for maintaining a regional base for western Canada’s grain
industry.
“It would minimize the industry’s need to be in one location,” said
Kraft.
“If there was less politics in the wheat trade, we’d tend to see the
centralizing of the industry move away from Winnipeg, to all across
Western Canada and the United States.”
University of Manitoba agricultural economist Ed Tyrchniewicz said
another factor that undermines Winnipeg’s role as centre of the
Canadian industry is the disappearance of farmer-owned grain elevator
co-operatives.
Those companies were dominant players in the industry that lobbied hard
to ensure the existence of regulations that would promote a local
western Canadian industry.
At their height, they were powerful enough to keep the Canadian
industry distinct.
With two of the pools gone and the other in financial trouble, the
voice lobbying for special regulations is beginning to wane,
Tyrchniewicz said.
Added to that is the increasing north-south pull of North American
trade, which is weakening the east-west focus.
The drive to differentiate is being challenged by the desire to
integrate.
Tyrchniewicz agrees with Kraft that ending the wheat board monopoly
would kick a lot of the props from under the Canadian industry.
The wheat board will last as long as it justifies its existence to
farmers by proving it can pull a premium out of the world market,
Tyrchniewicz said.
But if the board is unable to deliver those premiums, the average
farmer would probably want to reconsider its monopoly, he added.
He warned that the weakening or disappearance of the wheat board might
not be beneficial to Canadian grain companies.
“It’s not going to make the industry suddenly boom, because it’s a very
competitive world industry.”
“People said wonderful things would happen if we got rid of the Crow.
Well, we got rid of the Crow.”
Tyrchniewicz said he doesn’t think Winnipeg’s grain industry will ever
disappear. But it may be transformed from the home of a few huge grain
companies to a looser collection of many small players who know how to
use the Canadian prairies’ wide range of small acreage crops.
A buildup of small, non-elevator
owning grain companies has been occurring in Winnipeg in recent years.
Dozens of offices in the Portage and
Main area are home to small trading companies that are taking advantage
of the growth in pulse crops, special crops and specialized varieties.
Those kinds of companies may be following a better path than the big
grain elevator companies, Tyrchniewicz said.
“As we move away from the bulk, low value handling system, it puts the
whole structure into a new light,” he said.
Some of Canada’s smaller grain companies, such as Parrish and
Heimbecker, Paterson and Sons and the Richardsons’ Pioneer, still seem
to be doing well, Tyrchniewicz noted.
And he thinks institutions like the Canadian International Grains
Institute
will continue to focus international buyers on Winnipeg as the place to
come to buy grain.
“The presence of that kind of an institution, maybe more than the
Canadian Wheat Board and the Canadian Grain Commission, gives Winnipeg
an international profile.”
That leaves him hopeful of Winnipeg’s future as a city key to the grain
trade, even if its role may significantly change.
“I’m still a believer that Winnipeg will continue to be the core of the
industry in Canada,” said Tyrchniewicz.
