THE CHESS match that involved Canada’s largest grain companies came to an end last week with Saskatchewan Wheat Pool proclaiming checkmate.
In a successful takeover bid for Agricore United, Pool in its new form (it has yet to announce a new name) is easily the largest grain handler in Canada. The giant will have estimated annual sales of $4 billion, a 40 percent share of the prairie grain handling market, about 100 elevators capable of shipping more than 13 million tonnes per year and country elevator storage of nearly two million tonnes.
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Major port facility ownership at Vancouver and Thunder Bay, plus a prodigious array of farm supply outlets, result in a company that is a force to be reckoned with nationally and perhaps on the world’s chessboard as well.
Pool was a surprise aggressor when it announced its takeover bid last November. When Agricore United sought out James Richardson International as its white knight, the game was truly afoot. But the entire match wouldn’t have occurred at all without good prospects for the agricultural industry – a positive outlook that hasn’t been seen in years.
As it turned out, the game was not the rout that some expected in the early going. In selling some of its assets to Cargill and to JRI to satisfy regulators, Pool has effectively enlarged and strengthened the remaining grain companies. JRI in particular will benefit. It will become almost 60 percent larger under the new deal.
Of course, there is still one less player in the prairie grain industry and any reduction in competition is worrisome for its potential to reduce farmers’ options and increase their costs. The big three, JRI, Cargill and the Pool-On-Steroids, will own 64 percent of primary elevators and 68 percent of licensed storage capacity in Western Canada. There’s also the concern that concentration of ownership in many crop input supply outlets will mean higher costs for producers.
Competitive moves by the companies in their new configuration will bear watching, but with the ink not dry on the deal and shareholders yet to vote, it’s premature to speculate on how farmers will fare. However, further concentration in the grain industry has been in every company’s game plan for years, so there has likely been some preparation.
As a publicly traded company, the new Pool will be obliged to provide regular reports that will allow industry players to gauge its activities and, through them, monitor the health of the prairie grain industry. That’s a benefit of Pool ownership as opposed to JRI, which remains a private company with no public reporting obligations.
A healthy grain industry has active players but participation from new and/or smaller players is part of that health.
Patronage of the big or the small will be farmers’ call to make. They are not pawns in this match. With their ever-more-valuable land, their expertise and their quality product, prairie farmers have clout even in the new, more concentrated Canadian grain industry.
Bruce Dyck, Terry Fries, Barb Glen, D’Arce McMillan and Ken Zacharias collaborate in the writing of Western Producer editorials.
