Bunge will invest in the prairie grain industry once the Canadian Wheat Board’s monopoly is removed, says Bunge Ltd. chief executive officer Alberto Weisser.
“We are already a large originator of canola. Why not also originate grain?”
Debate has swirled around the Winnipeg grain trade about whether the end of the CWB marketing monopoly will attract more investment capital and players to the Prairies or further increase the corporate consolidation that has reduced the prairie grain handling business to three giants and a few smaller operators.
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Bunge is already a large canola crushing company on the Prairies, but does little with grain. It owns an export terminal in Quebec City that handles CWB grain but does nothing directly on the Prairies.
However, the end of the CWB monopoly improves the environment for Bunge, which is a vocal proponent of the free market and an opponent of government intervention.
Weisser said government intervention causes many problems in world grain markets, such as the sudden spike in world food prices after the Russian moratorium on grain exports last year.
He said the moratorium provoked the Arab Spring revolts because of escalating food prices.
“We are very, very clearly against any kind of interference,” said Weisser. “Let the markets work. We would not have these spikes in prices if there would not be this interference.”
Bunge North America CEO Soren Schroder said grain would fit well in rounding out the company.
“We have the eastern piece in grain (with the Quebec City terminal), we have the west and east piece in crush, we are missing a few pieces in western grain,” said Schroder.
“That will be next on the agenda.”
However, Weisser said Bunge won’t rush into investments. The company is deliberative in its movements, befitting a global corporation that began in 1818 and is now active in every region in the world, making it and Cargill the two most widespread agricultural trade companies.
Bunge could invest in new facilities in Canada, especially as demand drives food production in the next few decades to continually increase. That could include grain elevators and export terminals.
But Bunge could also decide to buy existing Canadian companies, or partner with domestic players. The company has a wide range of ownership arrangements and is flexible.
“There are so many different models,” said Weisser. “You don’t need to own. Often it’s better (to have) a good partnership.”
Bunge bought seven agricultural companies in the United States last year, so corporate growth can come from acquisitions that fit its supply system.
“You have these family owners (of companies) who get tired or want to move on, and sometimes it’s better to have it part of a bigger system,” said Weisser.
“You don’t need to build.”
Bunge is pouring money into the prairie canola crushing industry, doubling the size of its plant in Altona, Man., and planning to expand its three other prairie plants.
Weisser said it is a natural industry to invest in because the expanding and wealthier world population will demand more vegetable oils, and canola is one of the best.
“Most people forget that the biggest challenge we have in front of us is we will have to nearly double the production of grain in the world,” said Weisser.
“This, with a maximum 10 percent expansion of agricultural land. Everybody has to contribute something to that.”
Schroder, who convinced Weisser and the rest of Bunge that the Canadian crusher expansions were a good idea, said he believes vegetable oil crop demand will remain strong for years.
“We are living in this balance that is so tight (for world food supplies) that we can’t afford any problems,” said Schroder.
“It just doesn’t seem like we will ever get into a situation where we have buffer stocks that are big enough that we can survive a year or two of problems. I think those days are over.”
He said canola is a particularly good fit with future demand because it is a food-based crop with high oil levels rather than a feedgrain based crop, such as soybeans, which has half the oil content.
“These oil-rich seeds are really the ones that for the medium and long term will win out in the returns, from the farmers’ perspective.”
There has been much skepticism about whether prairie farmers can produce enough canola for Bunge, Richardson International, Louis Dreyfus and Archer Daniels Midland as they add capacity, but Schroder said he had few doubts production would grow and his company would have enough.
Prairie farmers will grow more than 20 million tonnes of canola by the end of this decade, he added.
Weisser said adding new capacity sometimes means plants run at less than capacity at the beginning or during poor crop years.
However, with his company operating more than 60 crushing plants around the world, those short-term problems become blips.
“When you have plants in China, Vietnam, South America, rapeseed plants in Europe, you build a global network which is resilient for these kinds of situations.”
All about Bunge
• In 2002, Bunge acquired the oilseed crushing plants formerly owned by Saskatchewan Wheat Pool’s CanAmera Foods.
• Oilseed crushing and processing plants are located in Altona and Harrowby, Man., Nipawin and Dixon, Sask., Fort Saskatchewan and Wainwright, Alta., and Hamilton, Ont.
• Bunge, founded in 1818 in Amsterdam, has operations around the world with 32,000 employees in 30 countries.
• It is the world’s leading oilseed processor and also mills cereals and sugar cane and manufactures fertilizer.
• Its headquarters moved to White Plains, New York, in 1999.
