WINNIPEG – Now that any lingering thoughts of taking over United Grain Growers have been permanently laid to rest, the two prairie pools must look for other ways to secure their future.
Officials with Manitoba Pool Elevators and Alberta Wheat Pool say they feel no sense of desperation in their efforts to remain competitive in the rapidly changing Canadian grain industry.
But at the same time they wouldn’t rule anything out, including the possibility of forging their own strategic alliance with a multinational grain company.
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“I don’t think that’s something you can ever rule out,” said Anders Bruun, corporate secretary of Manitoba Pool.
But he said it would never be an alliance similar to the one between UGG and Archer Daniels Midland Co., a deal which he said gives ADM veto-based control over every aspect of UGG’s grain business: “We’d get hung if we did that.”
Alberta Pool president Alex Graham said it’s simply too early to say what the two pools might do either jointly or individually.
“We’re now at a point where we have to sit down, gather our thoughts, get our boards of directors and senior management together, examine our financial resources and where we are at year-end and say ‘OK, where are we are going to go now?’ ”
Some outside analysts say UGG’s alliance with ADM leaves the two provincial pools as the weak players of the grain industry, whose future is threatened by deregulation and increased competition from U.S. multinationals like ADM and ConAgra.
“They’re in a difficult position now,” said David Schroeder, a grain business analyst with Dominion Bond Rating Service of Toronto.
The pools lack the capital base to compete with bigger players, he said, adding that their co-operative structure prevents them from getting money needed to develop a modern, efficient grain handling infrastructure.
But pool officials reject that analysis.
Graham said Alberta Pool got $100 million in new capital from financial markets last year and he would put his company’s investment and modernization programs up against anyone in the industry.
And while the pools may be small potatoes when compared with U.S. giants like ADM or ConAgra, they are dominant in their home provinces and are involved in a variety of processing and marketing ventures.
Bruun said Manitoba Pool has more high volume concrete elevators than any other company in Manitoba, adding both pools are financially strong.
“We are strong, viable organizations who have not felt pressure to seek alliances south of the border or anywhere else,” he said. “We can sit down and make plans at our leisure.”
He said the pools will rely on providing good services and good prices to maintain market share. They’ll also promote the financial benefits of dealing with co-ops and being Canadian-owned and farmer controlled.
Asked if the two pools might seek an alliance with Saskatchewan Wheat Pool, Graham said that will depend on the direction received from the pools’ boards of directors. He said the pools have clearly adopted different business strategies in the last few years and there would be some difficult structural issues to deal with.
“At some point in the next month I’ll be at a meeting somewhere with the presidents of the other pools and (Sask. president) Leroy Larsen will look me in the eye and ask ‘what’s next?’,” he said. “I’m not sure how I’ll respond.”
In an interview from Regina, Larsen said he hopes the other two pools expand the already considerable number of joint ventures and co-operative efforts involving all three pools.
“I would like to hope that’s possible,” he said, adding it will be up to Manitoba and Alberta pools to take the initiative.
In the wake of shareholder approval of the deal which will see ADM get 45 percent of UGG’s shares, the pools have to decide what to do with their 14.98 percent of UGG’s shares, acquired during their ill-fated takeover bid earlier this year.
Pool officials say they have no interest in holding onto the shares, and will be able to sell about one third of them for a profit under the terms of the ADM deal. However, Graham said UGG shares have never been very salable and there is probably even less interest by investors in the wake of the ADM deal.
