EFFORTS to inject more competition into Canada’s west coast grain terminals, via the deal known as the Terminal One project, are in danger of falling off the rails.
The sale of one of Agricore United’s Vancouver grain terminals seemed hopeful at the beginning of August with the announcement that a consortium of five farmer-owned Saskatchewan inland terminals was negotiating to buy the former United Grain Growers facility.
AU was ordered by the Competition Bureau in 2002 to sell the terminal under terms of the merger approval between Agricore and United Grain Growers.
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But two weeks ago, AU requested an extension because it needed more time to negotiate a deal. The Competition Bureau turned down the request without citing a reason.
Last week, AU filed a request to the Competition Tribunal, a court independent of the Competition Bureau, to rescind the order forcing it to sell the terminal. In its submission, AU argues the grain handling environment has changed drastically since the original order. It says that only about 25 grain handling companies need access to Vancouver facilities and these are satisfactorily serviced through existing port facilities.
Some grain companies have ownership stakes in port handling facilities and others hold long-term contractual arrangements with west coast terminals.
AU contends that there is not enough independent grain available to make the UGG terminal feasible for a new buyer.
It also suggests that port terminals in Vancouver suffer from “chronic long-term excess capacity” and that a joint operating agreement between Saskatchewan Wheat Pool and James Richardson International’s coast terminals, if approved, will exacerbate that problem.
Excess capacity, according to AU, means competition between west coast port grain handlers is already sufficient.
This competition question is critical: is there enough competition among west coast grain handlers to ensure farmers get a fair deal on handling costs?
While that question could keep industry players tied up for years, the present plan to sell would not add capacity. It would only add another player.
But it could also add competition by offering another choice for inland terminals, and in theory at least, that could drive port handling fees lower and reduce handling charges for farmers.
Anything that reduces farmers’ costs is worth a close look, and the problem of not enough grain being available because it is tied up in long-term contracts to the current west coast players may not be insurmountable.
To that end, the Competition Bureau should grant an extension to allow AU and Terminal One to fully explore all avenues for a deal – a deal that looked hopeful mere weeks ago.
With that extension, AU could delay its plan to try to have the original terminal sale order reversed.
