The head of Canada’s second largest grain company says the industry either needs much bigger annual crops to handle or must close elevators to improve profitability.
Saskatchewan Wheat Pool operated 590 wooden elevators 20 years ago but now has about 43 concrete elevators and six special crops facilities. That is too many, said Mayo Schmidt, president and chief executive officer, during a conference call with analysts and reporters discussing the company’s 2005 financial results. It is a problem throughout the industry, he said.
“Fundamentally, we need some consolidation in this industry.”
SWP estimates that the industry’s country elevator handling capacity exceeds the average crop size by 25 percent, he said.
“It is a very competitive business that has excess capacity and a high fixed cost. When you have that environment, when you get into years when you don’t have normal production, which we have experienced the last four or five, that creates challenges.”
The situation would be different if the system was on average handling three to five million more tonnes annually, he said, but that is unlikely.
