A lentil processor says the increased involvement of major grain elevator companies in the red lentil industry is destroying value-added businesses, undermining prices and tarnishing Canada’s reputation in overseas markets.
“I don’t think the vision for the industry was to have this turn into a commodity where you just dump it into a boat,” said Greg Simpson, president of Simpson Seeds Inc.
Three years ago, the big elevator companies had little interest in the lentil sector. Their curiosity was piqued in 2009-10 when growers harvested nearly two million tonnes of a crop worth more than $1 billion to the Saskatchewan economy.
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Simpson said most of Canada’s red lentils destined for whole seed markets now move in field-dressed bulk shipments through the line companies. That shift in the way the crop is marketed has damaged his business.
“There is some red lentil processing that we’re still doing but it’s nothing like it was three years ago when we were growing the industry.”
The Moose Jaw, Sask., company is delaying plans to build more red lentil splitting plants.
“The bulk FD (field dressed) has basically kiboshed that dream and that vision,” said Simpson.
Viterra did not respond to an interview request for this story.
Murad Al-Katib, president of Alliance Grain Traders, the world’s largest lentil processing company, said bulk freight has become much cheaper than container freight and that is forcing changes in the industry.
His company shipped its first vessel of bulk red lentils to North Africa on Aug. 25 and plans to follow that with other shipments to North Africa and the Indian subcontinent in the fall.
Al-Katib estimates 10 to 15 percent of the red lentil crop is now moving in bulk to a handful of overseas customers. He doubts it will grow beyond that level because many countries do not accept bulk shipments.
“We’re not abandoning the container program. It’s still going to be 90 percent of our handle,” he said.
Alliance is exporting cleaned, gravity- graded and sized product in bulk, which Al-Katib contends is a far cry from the dirty product the large elevator companies are shipping.
“We think that non-commercially clean grain provides significant phytosanitary risks to the industry. We don’t like that,” said Al-Katib.
Neither does Simpson. He said it is only a matter of time before an important lentil market is shut down by a bulk shipment of dirty product containing an unwanted pest or unapproved genetically modified material.
He believes Canada’s reputation for shipping quality product is being tarnished.
“I just think it is injuring our industry. Obviously we want to see growers and industry come together and really think about the implications this has long-term for us,” he said.
Simpson blamed the large elevator companies for undermining prices by dumping 20,000 tonnes of product at a time into a thinly traded market.
“That has just really killed the market for Canadian reds. They’re shipping it bulk and basically they have taken out the processing sector.”
Peter Wilson, global supply chain manager for JK International Pty Ltd., predicted the lentil industry shakeup a year ago in an interview withThe Western Producer.
He is calling for a continued trend toward bulk shipments.
“The line companies will continue to reflect market share in lentils that they do in other crops,” he said.
They simply can’t afford to ignore a three million acre crop.
“In some ways (the lentil industry is) a victim of their own success,” said Wilson.
He doubts the bulk shipping trend will spread to green lentils. Reds are grown in large volumes, are homogenous in appearance and are used for similar purposes. Greens are a much more specialized product that requires gentle handling and container treatment.
Wilson doesn’t share the processor concerns about phytosanitary issues. Better breeding, agronomy and harvesting equipment have vastly improved the quality of the product coming off farmers’ fields.
“These (new combines) are mobile grain cleaning facilities. The sample that they can take off some of the combines is simply gorgeous,” he said.
But Simpson said he is embarrassed by the quality of what is arriving overseas in bulk vessels.
“That’s an eyesore for the Canadian industry. I don’t think growers would be proud of the fact that their lentil that they take a lot of care and try to produce a quality product ends up looking like rubbish,” he said.
The only thing that will chase the large companies out of the industry is rising bulk freight rates or continued sub-20 cent red lentil prices that convince growers to abandon the crop, said Simpson.
