A Saskatchewan company dedicated to increasing farmers’ profits has entered the Vancouver grain terminal sweepstakes.
Farmers of North America said farmers have made non-binding commitments to direct 500,000 tonnes of grain to the Agricore United terminal that’s for sale.
The organization is looking to gain commitments totalling one million tonnes and then talk to potential buyers and operators of the terminal about using the grain as the basis for making a bid to buy the 102,070 tonne capacity export terminal.
“We’re interested in talking to anybody who is interested in this facility that will help ensure producers have competitive handling rates and marketing opportunities at the West Coast,” said Ash Skinner, the FNA’s corporate development officer.
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He said because the proposal generated commitments of 500,000 tonnes of grain in just two weeks, it shows farmers want a direct stake in handling and marketing their crops.
“We’re not surprised that farmers are interested in being involved at another level of the marketing side of their business, but we were surprised by how fast it came in.”
The Saskatoon-based FNA is best known for arranging bulk purchases of farm inputs to garner savings for its 6,000 members.
In late November the company sent a letter to its members and ran an advertisement in The Western Producer asking farmers if they would take on three- to five-year contracts to direct grain to the terminal through producer cars, inland grain terminals or other yet-to-be-determined logistical arrangements.
Murdoch Mackay, vice-president of operations for AU, said in an interview last week he learned about FNA’s interest in the terminal through the newspaper advertisement.
“We’re more than happy to talk to them, but it sure would have been nice if they’d talked to us before going public,” he said.
Skinner said FNA’s plan is to first gather grain commitments and then talk to industry players who might want to get involved, including grain companies, inland terminals, the Canadian Wheat Board and the Canadian Grain Commission, before approaching AU with a proposal.
“We want to look at all the other people potentially interested in the facility and find out if there is a fit with producers making commitments to put in grain,” he said.
Whether FNA would make a direct ownership investment or act as marketing agent remains to be seen, said Skinner, adding he expected the terminal would sell for $20 million to $30 million.
In 2002 the federal Competition Bureau ordered AU to sell one of its terminals in Vancouver to preserve competition at the port.
In May 2005 the company announced a sale to Terminal One Vancouver, a consortium of five Saskatchewan-based inland terminals.
However, that deal foundered on the consortium’s inability to gain commitments for the roughly 1.6 million tonnes of grain needed annually to make the terminal viable.
In August, AU asked the federal competition tribunal to rescind the original sale order, arguing there is excess capacity and enough competition at the port. The tribunal, an independent quasi-judicial body, is scheduled to hear the case in Ottawa in April 2006.
Mackay said there’s no need for the terminal to be sold.
“If we keep ownership, we’re not going to turn down anyone’s grain,” he said.
“My responsibility is to run a terminal and a terminal needs grain, so I look forward to dealing with other people and handling their grain.”
He said the current arrangement at the port benefits the system and farmers by allowing the company to specialize its operations, with one terminal focusing on canola and malting barley, another on peas and canola, and another (jointly owned with Cargill) on CWB grain.
He acknowledged that handling tariffs have increased but said all terminal operators face rising costs in areas such as energy, salaries, security, labour, construction and steel supplies for maintenance and repairs.
