Glencore International is simultaneously getting rid of some of its newly acquired grain handling assets and promising to expand its remaining fleet of Canadian grain elevators and port terminals.
In an effort to appease Canadian regulators, Glencore entered into an agreement with Richardson International to sell the rival grain company 19 elevators, its 25 percent share in Cascadia Terminal in Vancouver and one of its terminals in Thunder Bay.
Richardson said the deal will result in a reshuffling of market power in the western Canadian grain handling industry. Viterra controlled 45 percent of the market and Richardson 25 percent.
Read Also
Alberta cattle loan guarantee program gets 50 per cent increase
Alberta government comes to aid of beef industry with 50 per cent increase to loan guarantee program to help producers.
After the deal, each company is expected to have about a 35 percent share of the market, which Glencore hopes will mollify the Competition Bureau.
However, Glencore doesn’t intend to rest on its laurels. In a news release announcing its purchase of Viterra, the company said it plans to expand the Canadian business.
Chris Mahoney, director of agricultural products at Glencore, expanded on that commitment during a conference call with reporters.
“Because of the undoubted need for Canadian production to grow and Canadian exports to grow, we expect to invest further in handling infrastructure and port infrastructure,” he said.
Mahoney said the company plans to expand its reach into the United States through acquisitions, but in Canada the growth will likely be “organic” from now on.
Glencore also intends to increase Viterra’s contributions to wheat research and global food security initiatives at western Canadian research and educational institutions.
However, there is one aspect of the business where Glencore appears to be unwilling to invest. It has agreed to sell 90 percent of its newly acquired crop input business to Agrium Inc. and another 13 stores to Richardson.
Adrian Measner, president of Soumat and former chief executive officer of the Canadian Wheat Board, can understand that strategy.
“They seem to want to focus on their core competencies and that makes a lot of sense to me. They are a marketing organization. They know grain very well,” he said.
Brian Hayward, president of Aldare Resources and former chief executive officer of United Grain Growers and Agricore United, said merchandising grain requires a different mindset than selling crop inputs.
One of his greatest challenges as CEO of Agricore United was managing those two divergent cultures and mindsets. Grain merchandising is a trade mentality where people are mindful of managing expenses like advertising.
Retailing inputs is a high margin business that is all about spending money on branded products.
“There are some companies that just go, ‘you know what? It’s not our expertise. We’ve never been good at it, so let’s just stick to what we do well,’ ” said Hayward.
