WINNIPEG – When Curt Vossen envisions the future of the Canadian grain industry, he sees not one grain handling system in Western Canada, but two.
One system will consist of 125 to 150 large, high-throughput elevators shipping bulk grain in 50- and 100-car trains to export facilities.
The other will consist of 200 smaller facilities, primarily handling commodities destined for domestic users and processors.
Those smaller facilities won’t be competitive with the big high-throughput elevators in long distance transport of bulk commodities to export position, said the president of James Richardson International, but they will play a vital role in the grain economy.
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Vossen expects to see strong growth in value-added processing on the Prairies, whether it be oilseed crushing, ethanol and biodiesel production, barley malting or flour milling.
“As a result you’ll see a need for collection and distribution facilities to support a growing domestic processing industry,” he said in a recent interview.
“So I think these smaller facilities that we see today will be more specialized and collect and distribute in a much smaller radius.”
As greater volumes of crops go to domestic processing facilities, that means less will be exported, and that will likely result in the closure of some terminal elevators at Vancouver or Thunder Bay.
“I think we’ll soon see that we have excess throughput capacity at terminal positions,” said Vossen.
The least efficient facilities will be closed and the remaining ones will see volumes remain flat or possibly decline.
Canada will remain a major supplier of food to overseas customers, but more exports will be processed rather than bulk products.
For example, he foresees the day when JRI and others will be shipping processed canola oil, in addition to bulk seed, to buyers in Japan and China.
With high transportation costs, sellers and buyers alike will look for ways to minimize the cost of shipping.
One way to do that is to ship only what is being sold; in other words ship the canola oil, rather than the seed that includes both oil and meal.
“Why would a Japanese processor of vegetable oil want to import seed when they could import just the oil?”
While acknowledging that there are artificial trade barriers in place against many processed products, he said the costs of transportation will become so high as to make those barriers untenable.
One thing Vossen doesn’t see in his crystal ball is any new sizable players entering Canadian grain handling.
While a publicly traded company like Viterra is always at risk for a change in ownership, Vossen doesn’t expect a big U.S. firm like ConAgra, Louis Dreyfus or Archer Daniels Midland would make a major move into Canada.
There’s really nothing of any size for them to buy, he said, and building new facilities would be an expensive and risky proposition, given current costs of construction.
