AS THE potential merger of Agricore and United Grain Growers dominates grain industry news, farmers wonder if it means the end of grain co-operatives on the Prairies. And they might ask themselves “what if….”
What if the prairie pools had merged after negotiations in the mid-1990s and altered the subsequent chain of events?
What if Saskatchewan Wheat Pool hadn’t undertaken share conversion and the ambitious Project Horizon building program?
What if the other two pools hadn’t attempted a hostile takeover of United Grain Growers?
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What if UGG hadn’t struck a deal with Archer Daniels Midland and set the stage for future mergers?
If readers will grant this indulgence, let’s travel backward to 1994.
Despite grain trade fluctuations and occasional merger flirtations since, that year was probably the last real shot at a merger.
The three pools presented a formidable business group. Alberta Wheat Pool had 256 elevators, including 11 concrete terminals, handling 5.8 million tonnes of grain annually. Its net earnings were $515,000.
Manitoba Pool Elevators had 135 elevators, including four concretes. It moved 3.5 million tonnes of grain in 1993-94, and had $9.42 million in earnings.
Sask Pool had net earnings of $40.4 million. Its 564 elevators at 410 locations moved 10.3 million tonnes of grain.
When it came to farm supplies, the co-operatives enjoyed strong market share. Sask Pool had $260 million in sales, and a $6.9 million profit. Manitoba Pool had $101.2 million in agri-sales and posted earnings of $4.6 million.
Where the companies worked together, they enjoyed great success. Xcan Grain Pool Ltd. had record shipments in 1994 of 5.163 million tonnes and $1.39 billion in sales. Its net earnings were $1.76 million.
Western Co-operative Fertilizers Ltd. in 1994 had just completed its most successful year since it began in 1964, shipping 812,000 tonnes of product. Net earnings were $20.6 million.
Through Prairie Pools Inc., the three pools presented a unified and respected stand on farm policy issues such as the new multi-lateral trade agreement, continued attacks by the United States on Canadian wheat exports, national safety nets, cash advances, grain transportation matters and environmental issues affecting agriculture.
The pools faced similar challenges: paying back member equity as members aged; the need for capital to upgrade or build new facilities; pressure from multinational corporations wanting to expand into Canada’s grain industry; and a changing global marketplace that required bigger players.
If the three pools had joined in 1994, they could have eliminated the duplication of many costs and services, and likely found other efficiencies. They would have commanded respect in the global marketplace as one of the largest grain trade players. They would have had one powerful voice on farm policy, supported orderly marketing and the Canadian Wheat Board and sought alternatives to raise capital.
They may have been more cautious with diversification, co-operated to implement a western Canadian grain collection and transportation network, and shared costs and profits of an expanded concrete terminal system.
But there were big stumbling blocks in 1994 that prevented a merger, among them the size differences (Manitoba Pool was one-quarter of the size of Sask Pool, and half the size of Alberta Pool), and Sask Pool’s higher membership equity (a minimum of $17 million was paid annually in equity payments).
There were different investment priorities among the three. Alberta Wheat Pool estimated it needed $200 million for the next decade; Sask Pool estimated its needs at $250 million for capital projects.
The merger had overtones of a takeover attempt by the dominant Sask Pool, which wanted its own executives to run the new company and establish the head office in Regina.
In 1994, there wasn’t enough willpower, conciliation and vision to merge the three co-operatives.
The players needed to identify mutual needs and future priorities, decide how to raise capital while protecting co-operative structure and prepare the membership to accept a regional alliance.
What if a merger had occurred? There might still have been consolidation and elevator closures, but perhaps at a slower pace. There may have been a different delegate structure, and the dire need for capital might still have led to changes in how funds were raised and equity paid.
But if the three pools had merged, today they would be the dominant grain industry player in Canada, have unquestionable influence on national agricultural policy, and perhaps retain the ideals of grain co-operatives that were envisioned by their founders.
