Company sensitive to farm costs: Schmidt

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Published: January 24, 2008

Viterra says it won’t respond to high grain prices by raising prices and fees charged to farmers.

It’s almost an article of faith among farmers that when grain prices go up, the price of inputs quickly follows suit, as suppliers charge what they think the market can bear.

Mayo Schmidt, chief executive officer of Viterra, said his company won’t do that.

During a conference call last week about the company’s 2006-07 financial results, Schmidt was asked whether the company would take advantage of the increased cash flowing to farmers to charge more for handling grain or buying farm supplies.

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“I think it would be a mistake to disrupt our relationship with our producers by such a dramatic change in what they have experienced in the past,” he said.

Schmidt said Viterra’s strategy is to make profits by improving efficiency, managing logistics to reduce costs and extracting maximum revenue from end-use customers, not by trying to get more money from producers.

But he acknowledged that as producers earn more money from crops they may be less likely to shop around for the best deals.

“That gives us more flexibility to work with them, as they’re less driven to demand more competitive bids on every bushel or tonne of grain they sell,” he said.

Colleen Vancha, Viterra’s vice-president for industrial relations and corporate affairs, said with three strong companies (Viterra, Cargill and JRI Ltd.) competing for farmers’ business, it would be counterproductive to unilaterally raise prices to farmers.

“There’s lots of competition in the marketplace and the farmer would just go somewhere else,” she said.

“We can’t do it, and even if we could, we wouldn’t.”

About the author

Adrian Ewins

Saskatoon newsroom

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