In the wake of its failed takeover of a rival grain company, Manitoba Pool Elevators announced its backup plan last week for remaining a grain industry player on the Prairies.
Over the next five years, Manitoba Pool will overhaul its network of 120 grain elevators into a hub and spoke system.
High throughput elevators on main rail lines handling at least 75,000 tonnes of grain will form the hubs in regions of the province. Smaller elevators will serve as spokes, providing extra storage for the larger ones.
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The pool has some experience with the concept, running its Hartney and Souris points from the Elgin elevator, and collecting grain at Fork River and trucking it to nearby Dauphin.
Company officials also traveled to Kansas City a year ago to look at how the Farmland co-operative runs a similar system.
“It gives us the flexibility to work within the system that we have but at the same time develop a system for the future,” said chief executive officer Greg Arason.
As delegates toasted each other with water glasses at the annual meeting in the afterglow of the company’s best-ever financial results, Arason acknowledged the bottom line won’t stay quite so rosy.
The pool posted net earnings of $28.1 million in 1996-97. It handled 3.3 million tonnes of grain.
But this year, Arason projects the company will handle three million tonnes, which he said will mean about $2.5 million less in revenues.
The pool also faces new competitors offering enticing prices at large, concrete facilities in the province. Arason said the pool, which handles more than half of all grain moved in Manitoba, lost two percent of its market share last year.
So it will cut costs at smaller, older elevators by removing the highest-paid employees, and moving staff around more.
The company begins negotiating a new contract with the Grain Services Union early in 1998 and Arason expects the new structure to be a significant issue at the bargaining table.
Arason said the approach will save some jobs because it will prevent smaller, local elevators in good condition from shutting down.
The pool closed four elevators last year. It had expected to close more, but ended up using them as storage.
“If we closed a number of elevators right now, we could probably reduce our costs, but I think we would also lose business,” said Arason.
So far, Arason said farmers like the idea.
“They see this as a way to make Manitoba Pool a little bit different than any of the others and present an alternative, rather than all of us building big concrete elevators at a few locations.”
