Press releases are often notable because of what they don’t say. Then again, sometimes they unintentionally speak volumes.
For example, consider the official statements coming from the Glencore team related to their role in the continuing consolidation and concentration of the grain handling business in Canada.
In 2012, when Glencore announced it was acquiring Viterra, the last remnant of the once mighty Prairie co-operatives, it offered these reassuring words to farmers.
Read Also
Farm equipment sales sector sees significant structural changes
Farming equipment sales have been declining for a number of years now, and one industry professional believes structural changes in the industry are needed to curb that trend.
“Glencore is confident the acquisition of Viterra will deliver significant overall benefits to grain farmers,” the release states. “The transaction will give farmers access to Glencore’s unparalleled global distribution channels and increase their ability to export their product into international grain and oilseeds markets.
“Glencore’s global reach and expertise will provide farmers with strong protection from market volatility, more options to market their grain and oilseeds and more competitive pricing resulting from Glencore’s wider markets access and its more consistent demand for grains and oilseeds.”
Fast forward to June 2023 and Glencore’s announcement that Viterra is be merged with Bunge.
The wording in that press release is much more succinct and conspicuously, offers no direct assurances to farmers. “The merger of Viterra with Bunge is expected to realize significant value for Glencore,” it says.
Farm organizations were quick to flag the merger as detrimental. Their concerns have recently been corroborated by Canada’s Competition Bureau and an independent analysis by University of Saskatchewan agricultural economists Richard Gray, James Nolan and Peter Slade, who were commissioned by several Prairie commodity groups.
The economists’ analysis found that the merger would result in more than 40 per cent of the export capacity at Vancouver controlled by one firm, which would increase the export basis by an estimated 15 per cent. Further market concentration in canola crushing would increase canola crush margins by 10 per cent. Aside from the immediate economic harm, it found that the merger may also reduce incentives for Viterra to build its proposed canola crushing facility in Regina.
The combined impacts would reduce producer income by approximately $770 million per year.
These reviews highlighted the stake Bunge holds in G3 Global Holdings, which is the majority owner of G3 Canada Ltd. along with minority shareholder investor Farmers Equity Trust, established in 2015 to manage the shares held by farmers who formerly did business with the privatized Canadian Wheat Board.
The stake in G3, which includes the ability to appoint directors, is likely to affect how aggressively G3 competes for grain in areas where it competes against Viterra.
As the Competition Bureau pointed out, the proposed transaction would combine the company with the most oilseed crushing facilities in Canada (Bunge) with the company that has the most primary grain elevators in Western Canada (Viterra).
One partial solution is to require Bunge to divest its port terminal interest in G3 Ltd. to the other shareholders or external interests.
However, the economists’ report could find no easy remedy for the further consolidation of control in canola crushing, especially if the Regina plant does not go ahead.
“This creates a worst-case scenario of a concentrated industry with limited capacity,” the report says. “If there was to be a requirement for merged BV to build the Regina facility, the Regina facility would give BV a 37 per cent market share, which would in turn still increase crush margins by about 10 per cent.”
“Both outcomes are undesirable and would come at a large cost to Canadian canola producers.”
The anti-competitive tentacles of this deal reach much deeper than a consolidation that makes two competitors into one. This is about who will shape the future of grain handling and oilseed processing in Western Canada.
Farmers’ concerns have been verified. Regulators must act.
