The new president of Cargill Ltd. says his company is in an expansionary frame of mind.
“We’re really poised for some further growth in Canada, not only on the grain side, but also on the food side,” said Len Penner.
“That’s where the key opportunities for growth tend to be and we see the Canadian environment as a good one to expand in.”
Most farmers in Western Canada probably identify Cargill as a grain company first and foremost. But Penner said anyone who thinks that hasn’t been paying attention.
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Grain handling and exporting represents just one of the 14 businesses listed on the company’s website.
In fact, you could make up a pretty wide-ranging menu from the various food enterprises in which Cargill is involved.
There is egg processing and animal nutrition, chocolate manufacturing and malt production, salt and sweeteners, beef processing and starch, canola processing and even natural gas.
While not pointing to any specific new projects, Penner said the company is constantly looking for ways to establish new links in the food chain.
“The idea for us is to provide solutions that can add value for a food manufacturer.”
A good example is the company’s case-ready meat packaging facility in Toronto, which produces meat cut and wrapped on Styrofoam trays, ready to be displayed in grocery stores’ meat counters.
The plant, which occupies 167,000 sq. feet and employs 800 skilled workers, was acquired 11 years ago and was the first case-ready operation in North America for Cargill.
Penner took over as president of Cargill Ltd. at the beginning of December, replacing Kerry Hawkins, who retired after 41 years at the helm of the company.
Penner had been vice-president since 1998 and has worked for the company in various capacities since 1975. He will retain his role as head of Cargill AgHorizons, the company’s grain shipping and crop input business.
As far as the grain business goes, the new Cargill president said his company, along with others in the industry, faces three major challenges: industry overcapacity; transportation logistics; and the economic well-being of farmers.
Consolidation could be part of the answer, he said, especially given the questionable financial strength of some players in the industry.
“The overall health of the industry is a concern. It’s not good for an industry to have players that are not healthy.”
That description doesn’t apply to Cargill. While the company doesn’t release annual financial results, commercial bond-rating companies say the Canadian company and its American parent Cargill Inc. have a strong balance sheet, large cash flow, well-diversified operations and a leading position in most of the world’s agricultural markets.
On the transportation side, Penner said the strong growth in demand for rail service from commodities such as coal, fertilizer, potash and intermodal traffic has put a squeeze on rail capacity to the West Coast.
“I’m not sure we have confidence that we can achieve the needed grain shipping capacity by the way we’re operating today,” he said.
Penner said all west coast commodity shippers, along with railways and governments, must work together to develop long-term solutions to improve rail capacity.
It’s also crucial to ensure farmers are able to make a return on investment, something that hasn’t been the case in recent years, thanks to bad weather, mediocre commodity prices, high input costs and the well-documented problems in the beef industry.
There is no simple solution, he said, but one approach might be to identify those farmers who have managed to survive and prosper during the tough times, figure out what they’re doing and try to pass that on to other producers.
Back in the 1970s, when the company first appeared in Western Canada, Cargill became a dirty word for many farmers who viewed it as a foreign threat to the Prairies’ co-operatively-based grain industry.
Now, with the co-ops gone and farmers facing tough economic challenges, that attitude has almost dissipated, said Penner.
The questions farmers ask now are less about politics and more about dollars and cents.
