Delegates to the Farm Leadership Council last week didn’t hesitate to tell Viterra chief executive officer Mayo Schmidt their concerns about the grain company and how it does business.
Concerns over service, competitiveness and just what Viterra thinks of its relationship with farmers were put to Schmidt during his appearance at the council’s annual meeting in Regina.
The council, funded by Viterra, was formed as the Western Farm Leadership Co-operative to maintain farmer input after the former Saskatchewan Wheat Pool dismantled its co-operative structure. It now includes delegates from Alberta and Manitoba to reflect the new company’s reach.
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Viterra contributes more than $1.2 million annually to the council’s budget.
Delegates were pleased with the company’s financial situation, but a Winnipeg delegate said Viterra’s relationship with farmers is in jeopardy.
Local service has been reduced so much that it no longer meets some farmers’ needs, he said, adding that profitability for shareholders has to be balanced with farmers’ interests.
“Please keep my needs in mind,” he said.
Another delegate, Byron Richardson of Vermilion, Alta., said he has noticed a change in attitude. For example, freight premiums from his Viterra terminal will be awarded at the end of the year only if farmers deliver all the grain they said they would.
The company is painting everyone with the same brush, he said.
Richardson also noted that one of Viterra’s main competitors, Cargill, offered fertilizer discounts of $200 per tonne to customers in his area and asked them to come back next year.
He asked what sets Viterra apart from other companies, other than its funding of the FLC.
Schmidt told the meeting that the company values farmer input and recognizes it could do things better. Viterra has established a customer solutions group to identify opportunities to improve service.
“I won’t stand here and tell you that we’re perfect at (working with farmers),” he said. “I know we’re not.”
Schmidt said corporate costs went up $25 million last year due to acquisitions of plant equipment and employee pay raises and contracts. He said the company could look at its number of country employees but additional help comes at an additional cost and income has to be generated to offset the expense.
Asked about the possibility that Viterra could be the target of a takeover attempt, he said it isn’t impossible but it is unlikely.
“Viterra has gotten, in the words of the investment bankers, a bit chunky,” he said.
With 230 million shares outstanding, at about $10 per share, its market capitalization is about $2.3 billion. A purchase would also require a premium, he said, putting the price at billions of dollars.
Schmidt addressed concerns about a drop in the share price by explaining how agricultural commodities got caught in the financial crisis.
He said TD Bank, for example, had its largest redemptions for capital in history last October after the public became significantly concerned.
Redemptions require liquidity, he said.
“We’re trading between one and two million shares a day, the share price is strong, so where do they go to get liquidity?” he said.
“They go to agriculture. So they came to us and said, ‘sorry but I gotta sell shares because my people want cash’.”
That forced Viterra’s price from $15 to below $6. Last week, it traded around $9.
Schmidt also told the farmers that Viterra’s first quarter loss is “not an indicator of our world. It’s simply a 90-day period of time that the economy around us collapsed.”
