Competition among grain companies is the main thing farmers hope can provide them with appropriate service and fair prices for their crops.
Prairie farmers are acutely aware that the playing field is tilted against them, their market power sapped by the fact there are many farmer-sellers and only a handful of large corporate grain buyers.
So whenever there is change within the grain industry, be it expansion or consolidation, there is strong interest in how it will affect competition.
The latest development in the grain buying business is Scoular buying Legumex Walker’s pulse business.
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Canadian-owned pulse and special crop company Legumex Walker ran into financial problems, mostly associated with its move into the canola crushing business. To preserve shareholder value, it had to find a buyer, and American-held, employee-owned Scoular stepped forward.
Taken on its own, there is not much to be concerned about. A financially secure company has taken over the assets of a struggling firm and plans to continue running them. As a larger and long established company, Scoular offers access to a large international supply chain. It says it plans to expand its presence in Canada and perhaps also handle wheat and canola.
However, the deal can also be viewed in the context of years of consolidation within the grain industry.
Of late, the biggest upheaval came with Glencore buying Viterra and the reshuffling of assets that followed.
Glencore-Viterra, Richardson and Cargill strengthened their dominance, followed by Parrish and Heimbecker and Patterson. Since then, these big players have bought out many of the farmer-owned terminals.
Also, the federal government eliminated the Canadian Wheat Board’s marketing monopoly.
Other more recent consolidations in-clude AGT’s subsidiary Alliance Pulse Processors Inc. buying West Central Road and Rail’s producer car loading sites in Saskatchewan and co-operative CHS buying North Star Agri Industries’ canola processing plant at Hallock, Minnesota near the Canadian border.
In some cases, farmers feel the loss of smaller companies, whose boards and managers were accessible and in tune with local needs. Some offered innovative services that made them stand out from the competition.
On the other hand, bigger companies can offer better access to global supply chains and deeper pockets to survive through tough times or a bad decision.
What does the future hold? The new owner of what was the CWB, G3 Global Grain Group, is gearing up with a handful of new elevators and plans for acquisitions to become a prairie-wide grain buyer.
Grain brokers and other services are becoming more sophisticated, and some are harnessing the power of the internet to directly connect grain buyers and sellers.
Competition in grain buying is evolving, and the field must be monitored to ensure farmers really have improved market power.
The government’s promises about the benefits of marketing choice will ring hollow if one can select only from a range of uncompetitive bids.
