Foreign grain companies are keenly interested in Western Canada’s independently owned inland grain terminals, says a spokesperson for one international firm.
Gary Williams, senior market manager for Scoular Canada Ltd., is familiar with one farmer-owned facility that has been approached by at least 20 grain company representatives wanting to buy or establish a relationship with the elevator.
“I don’t know that those are all major, mega grain firms but I would imagine that probably nine out of 10 of the major grain firms came to the door,” he said.
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Scoular is one of them.
The company is the 63rd largest privately owned business in the United States, with $5 billion in sales and 60 elevators.
It is now intent on becoming a bigger player in Canada after the Canadian Wheat Board loses its single desk powers.
“We came up to Canada almost 15 years ago because we thought the wheat board was going away,” he said. “So we hung out for 15 years doing other stuff.”
Now that the demise of the single desk is near, Scoular, like many other U.S. grain companies, wants to establish closer links with the origination side of the grain business.
“Certainly from day one we’re a buyer of wheat to take it down into (U. S.) millers and other end use markets that we’ve already been supplying,” he said.
Jason Skinner, chief executive officer of North West Terminal Ltd. in Unity, Sask., said many CWB customers lack assets in Western Canada.
“By removing the wheat board, essentially they don’t have access to grain unless they develop relationships with companies that do have assets in Western Canada,” he said.
Inland terminals are logical targets because the larger line companies don’t want to do business with American firms. Instead, they want to cut them out of the market.
Skinner said there has been a lot of interest in the Unity terminal recently.
“There is certainly a large frequency of either calls or visitors,” he said.
Williams said the starting point for those conversations is usually, “are you for sale?” If the answer is, “no,” inquiries quickly shift to forming an exclusive partnership or a non-exclusive partnership or simply a friendship.
Williams said if prices to buy assets are too high, grain companies may look at building their own facilities.
He said he wouldn’t be surprised to see a number of companies building one or two large elevators capable of handling shuttle trains instead of today’s 50 or 100 car loading facilities. They may even build one next door to an existing 50-car loading facility.
Skeptics need only look south of the border to North Dakota and Montana, where grain companies are building modern elevators.
“They’re actually going to be overcapacity for the size of the crops in those states,” Williams said.
Skinner said companies that are planning to build a terminal should think twice because a facility that cost $5 million to build 10 years ago would cost $30 to $35 million today.
Williams wouldn’t rule anything out. Some grain companies may want to build a new elevator to capture grain closer to the U.S. border, while others may see an opportunity in the anticipated demise of producer car loading facilities.
Those that aren’t building or buying will be signing wheat contracts with existing elevators the day after Bill C-18 receives royal assent, he said.
Skinner doesn’t believe the deals will happen that fast because of the lingering uncertainties in grain markets.
“I don’t see a lot of canola contracts or pea contracts being signed so I’m not sure why a lot of wheat contracts would be getting signed at this point. It’s pretty early yet,” he said.
“We’re just waiting to see how things will look.”
