All eyes are turning west as the grain industry and federal competition officials assess the impact of the proposed merger of United Grain Growers and Agricore.
The newly formed company, Agricore United, would assume a 51 percent ownership stake in Vancouver’s grain terminals.
The three terminals it would own either outright or in partnership with other companies would account for 63 percent of total grain terminal space at the port.
Agricore United would also own 45 percent of Prince Rupert Grain Ltd., giving it a significant ownership position in 70 percent of total west coast terminal capacity.
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“Certainly that’s not what you want to see in any industry,” said University of Saskatchewan economist Merv Painter.
That concentration of ownership “is a concern to us and I know it is a concern to a number of players in the industry,” said Greg Arason, president of the Canadian Wheat Board.
Competition bureau officials have been tight-lipped about their investigation of the merger.
But Arason said the bureau seems concerned about the situation at Vancouver.
“The discussions they’ve had with us are focused on west coast capacity and what the competitive alternatives and the competitive pressures are,” he said.
There are five grain terminals at Vancouver, with total storage capacity of 929,290 tonnes.
Agricore United would own 100 percent of the 102,700 tonne capacity UGG terminal, 70 percent of the 199,150 tonne capacity Pacific Elevator terminal in partnership with Saskatchewan Wheat Pool and 50 percent of the 282,830 tonne capacity Cascadia terminal in partnership with Cargill Ltd.
The other grain terminals at the port are Sask Pool’s 237,240 tonne volume facility and JRI’s 108,000 tonne capacity terminal (Pioneer Grain).
Brian Hayward, chief executive officer of United Grain Growers and designated to be CEO of Agricore United, said farmers and grain shippers have nothing to fear from the merger in terms of competition at Vancouver, which currently suffers from overcapacity anyway.
Every time a vessel moves from one terminal to another to fill out a load, for example, there is a charge that gets passed back to farmers. Agricore United would be able to designate specific terminals to handle specific grains, thus reducing berthing charges, he said.
Adrian Measner, the CWB’s executive vice-president of marketing, acknowledged that concentrated ownership offers the potential for increased efficiency. But it also offers the potential for higher handling charges.
The wheat board has not recommended a specific course of action to the Competition Bureau.
Ted Menzies, president of the Western Canadian Wheat Growers Association, said he thinks there are enough other grain handlers to keep costs in line. Shippers could also threaten to move grain through the United States if costs became too high, he said.
The merger is scheduled to take effect Nov. 1.
