The Saudi Agricultural and Livestock Investment Co. has been the silent investor in G3 Global Grain Group, which has bought 50.1 percent of CWB.
The Saudi Agricultural and Livestock Investment Co. (SALIC) owns SALIC Canada, which is a minority owner of G3. Bunge is the majority owner. The actual percentage split of the partners has not been made public.
SALIC was created to spearhead Saudi Arabia’s agricultural investments abroad.
Two developments have spurred Saudi Arabia to boost foreign agricultural investments.
It decided in 2008 to end its 30-year program to reach self-sufficiency in wheat and other crops because the required irrigation development was rapidly depleting the kingdom’s underground water. Wheat production is to end next year.
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However, as it turned increasingly to imported crops and meat, the international market was going through a period of shortages and wildly fluctuating prices.
The King Abdullah Initiative for Agricultural Investment Abroad was created with the broad goal of investing Saudi money to increase global food production and ensuring that some or all of the food, depending on the project, will go to Saudi Arabia.
SALIC is one of the tools created to carry out this policy. Its website says it is focused on the major grains, soybeans, edible oil, sugar, green fodder and red meat.
It is focused on opportunities in mature agricultural economies, such as Canada, Australia, New Zealand and France, as well as the South American exporters, the Balkan states of Eastern Europe and, for rice, India and Pakistan.
It is hard to see how the investment in G3 would increase grain production in Canada. It is more likely a window into the Canadian grain industry.
SALIC’s position in G3 could help it buy Canadian grain, but it will have to bid competitively to get farmers to deal with it.
Historically, Saudi Arabia was at times a major buyer of Canadian feed barley. It peaked in 2007-08 at 1.4 million tonnes but then bought nothing the next year.
It imported almost no wheat until 2008-09, when it bought 1.275 million tonnes, with Canada supplying the lion’s share.
It has increased wheat imports since then, but Canada has lost market share, mostly to European countries.
It would be good to rebuild market share there. The kingdom is wealthy. Its population is only a little more than 30 million but is growing at three percent a year. It should be a good entry point to other Gulf states such as the United Arab Emirates, Qatar and Kuwait, which also have young, fast growing populations.
The other good thing about Saudi involvement is that they have cash. Of course, Bunge also has lots of capital and it will likely want to use CWB to help keep its network of recently expanded canola crushing plants well supplied.
As Ed White’s stories on the deal say, it was access to money that was a key attraction for the CWB privatization team when looking for a partner.
To be a true competitor in the Canadian grain trade, CWB needs more elevators, particularly in Alberta, where it now has no presence.
It also needs a west coast terminal or at the minimum part ownership in a terminal.
These things could cost hundreds of millions of dollars.
That was a concern I had about the Farmers of North America proposal to buy CWB.
It had the attraction of making the CWB a farmer-owned company, but could it have acquired the money needed to flesh out the CWB and at the same time build its nitrogen fertilizer plant?
The Prairies are littered with agricultural companies that failed because they were under-capitalized.
G3 has so far put up little cash for the CWB assets. The $250 million included the value of Bunge’s export grain terminal in Quebec City and a handful of eastern grain elevators that are now rolled into CWB.
Some of the cash will also pay down CWB debt incurred as it built and bought grain handling assets over the past two years.
Future building plans will require new commitments from G3.
darce.mcmillan@producer.com
