The temporary closure on Jan. 2 of 27 Agricore elevators in Manitoba came as no surprise to grain industry observers.
The company was one of the slowest to consolidate its grain handling system and still has more elevator capacity than it needs, said David Schroeder, vice-president of the Dominion Bond Rating Service.
“If they’re going to survive, they’ve got to become more efficient. They can’t continue to operate all the old elevators and hope to make a return.”
The closures could last until April 2. Fifty-five employees have been laid off, mainly at Agricore’s wooden country elevators.
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Company spokesperson Diane Wreford said there are no plans for a similar move in Alberta. She said the closures in Manitoba were driven by the outlook for grain movement in that province.
“Grain movement in general is projected to be low for the next couple of months. There’s just not a lot of grain moving.”
Some of the 27 affected Agricore elevators could re-open earlier than April 2 if the need arises, Wreford said.
“It could be that some might open for a week or two and then close again. There is some flexibility there.”
Ken Sigurdson, an Agricore delegate at Swan River, Man., thinks the temporary closures are the first step toward permanently shutting the wooden structures.
Sigurdson said Agricore is risking the loyalty of its farmer members by putting too much emphasis on its high throughputs while cutting back service at the wooden facilities.
“When you shut these facilities down, the grain goes to the opposition and that does not make a lot of sense,” he said. “I think this is just a knee-jerk reaction by management because of the financial situation of the company.”
Communities affected by the temporary closures are watching with unease, concerned that the older wooden elevators may one day be closed permanently.
Mervin Presniak farms near Shoal Lake, Man., where an elevator has been temporarily closed.
Presniak said his nearest options for delivering grain are the United Grain Growers high throughput at Shoal Lake or the Agricore elevator at nearby Solsgirth.
He worries that the dwindling number of elevators in his area will mean less competition for his grain.
“It wasn’t a surprise but it was a blow for Shoal Lake,” he said. “You do need competition, no matter what the business is.”
Last year, Agricore reported net earnings of $1.2 million on sales of $3 billion for the fiscal year ending July 31, 2000.
Two special circumstances were given by the company as reasons for the low returns. Business was disrupted by a four-week elevator workers’ strike in the fall of 1999. As well, Agricore lost market share in Manitoba because it lagged behind its competitors in opening new high throughput terminals.
But Wreford said last week that lost market share was not behind the company’s decision to close elevators.
“We’ve regained a lot of market share. That’s not a major reason for (the closures). It’s simply a matter of economics.”
Agricore was formed through the merger of the Manitoba and Alberta wheat pools in 1998.
Wreford said the company will permanently close more of its older wooden elevators in the future. Several closures have already been announced for this year in Manitoba and Alberta.
In the past five years, Agricore has reduced its number of elevators in Manitoba from 131 to 60. Large high throughput terminals are replacing wooden structures. High throughputs can clean grain more efficiently than wooden elevators. The terminals can also blend grain to get a better grade, he said.
As well, high throughputs with their larger number of car spots are able to take advantage of rate incentives from rail companies. Those advantages mean better returns to producers, Wreford said.
“That’s what this is all about – cutting costs and being responsible to the owners, the farmers.”
