When Lloyd Affleck was first elected to the board of Saskatchewan Pulse Growers in 1992, he had a conversation with pulse industry guru Al Slinkard, who predicted that the processing sector would shrink to four or five players.
“That kind of put my hackles up,” said Affleck.
As an owner of a small pulse crop cleaning plant in Beechy, Sask., he was initially offended by the comment. But in hindsight it is starting to look prophetic.
“Look where we are. It’s almost scary, isn’t it?” said Affleck.
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A survey of special crops processors conducted by Saskatchewan Agriculture in 2002 found 136 companies. By the time of the follow-up survey in 2008, it had shrunk to 96.
“I would think we would be hard pressed to have 25 individual plants now,” said Affleck.
Industry consolidation took another big leap forward last week with the announcement that Manitoba’s Roy Legumex Group of Companies and Saskatchewan’s Walker Seeds Ltd. had merged to form Legumex Walker Inc.
Two of the industry’s most influential players had become one big entity and Slinkard’s vision is one step closer to reality.
“We could end up with maybe four players in the special crops industry along with the line companies,” said Affleck.
Saskatchewan Pulse Growers executive director Garth Patterson said 59 pulse companies are still listed in the association’s directory, although he acknowledged that many of them are big elevator companies or brokers who don’t handle the crop.
The database shows that less than 20 percent of the companies handle 80 percent of the province’s pulse production, mirroring the 20 percent of farmers who grow 80 percent of the province’s peas, lentils, chickpeas and beans.
“This is the evolution of competitiveness in our industry and it is not unique,” said Patterson.
If anything, consolidation in the pulse sector has lagged behind the rest of the agriculture and food processing industries.
“The reason it’s starting to happen now is that as an industry we’re maturing and growing and getting the attention of other investors. Before we were considered niche – quite small in the big picture,” said Patterson.
Affleck anticipates offshore pulse buyers may be interested in some of the remaining stand-alone assets, such as Canpulse Foods, T.W. Commodities, Lakeside Global Grains Inc., Southland Pulse Inc., Parkland Pulse Grain Co. Ltd., Simpson Seeds Inc., Prairie Pulse Inc. and Bornhorst Seeds Ltd.
“These are all very successful businesses,” he said. “Anybody that’s on rail, I think they’re all good targets.”
Affleck also wonders if the demise of the Canadian Wheat Board’s export monopoly might lead to a retreat from the pulse processing sector by the big elevator companies.
“They were starting to become players in the industry and they might have to pull back in order to finance their own grain side,” he said.
Legumex Walker made it clear in its initial prospectus that it intends to keep acquiring assets in the special crops industry, which means further consolidation is a possibility.
“It’s the way we are moving. Companies are having to do it to stay competitive,” said Patterson.
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