CEREALS ORGANIZATION CRITICAL OF BUNGE-VITERRA MERGER
BY IAN DOIG • PHOTO COURTESY OF ALBERTA CANOLA
On January 14, the federal government approved the controversial $8.2 billion acquisition of Viterra, a grain handler headquartered in Regina, SK by Bunge Global, a U.S. grain marketing giant. The federal government has put conditions on the sale, including that Bunge must sell six western Canadian elevators, invest $520 million in its operations in this country over five years and face controls on its stake in the U.S. owned grain company G3.
Grain Growers of Canada (GGC) has long raised concerns the deal may negatively impact Canadian farmers. The organization has cited warnings from the Canadian Competition Bureau and a University of Saskatchewan report that determined farmers will take a $770 million revenue loss should the deal go through without divestment from G3.
GrainsWest spoke with Kyle Larkin, GGC executive director, about the deal.
GrainsWest: Prior to the merger approval, what was GGC’s position on the Bunge-Viterra acquisition?
Kyle Larkin: Our ask to the government was for the combined company to divest of its 25 per cent stake in G3, because the Competition Bureau found the acquisition would lessen competition. The University of Saskatchewan report quantified that loss of competition at $770 million a year to grain farmers across the Prairies.
We were disappointed [the] announcement didn’t include that divestment. It included some conditions, but none of those go far enough to alleviate the concerns regarding lessening of competition on the Prairies but also in Quebec.
GW: How do you believe the market competition aspect of the deal may affect farmers?
KL: It is going to impact grain farmers with a lowering of price for their crops. When they’re selling grain, competition is really what upholds the price they get for their crops. With the lessening of competition, we expect to see a lessening of prices that grain farmers get. For individual grain farmers in Manitoba, we narrowed it down to a loss of $10,000 a year.
This comes at a time when producers are already facing death by 1,000 cuts. They’re facing an increase in input prices—fertilizer, seed and crop protection products—while they’re also seeing a lowering in price that they’re getting for their crops because of uncertainty in our two largest trading markets, China and the U.S. Thirdly, they’re seeing an increase in government taxation and government regulation. All these factors add up. The last thing we needed was another poor decision from the government.
GW: What is GGC’s concern with grain terminals at Quebec ports?
KL: There are three ports in Quebec that grain farmers sell to. There are the grain terminals in Montreal, Trois-Rivièresand in Quebec City. At all three of those ports right now, there’s either a Viterra or a G3 presence. And with the merged company, what we would effectively see is a merged Bungee that would be present at some ports. Again, a lowering of competition at the grain terminals that Quebec grain farmers sell to. And the system in Quebec, is a little different than in the West. In the West, a grain farmer will sell to their grain elevator, and that grain elevator will ship the grain from that community, usually to the Port of Vancouver. In Quebec. It’s a little different. Grain producers truck their individual grain directly to the grain terminal at one of the ports. They will see a lessening of competition directly at the ports.
GW: Why is GGC also alarmed about the implications for a newly announced Viterra canola crushing facility in Regina?
KL: That new facility would be very close to a pre-existing Bungee canola crushing facility. With the merged company, the question arises, and we don’t have an answer for this yet, will the new or larger Bunge move forward with the building of that new canola crushing facility when they already have a facility only a few kilometers away.
We’re hopeful the merged company will continue to move forward with the building of that important facility that would bring increased benefits to producers in that area. But we’re also concerned because of the market and business dynamics of it.
GW: What can be done to address these concerns now that the deal has been approved?
KL: Unfortunately, the government’s decision is final. There’s no appeal or a way to reverse the decision. While we’re disappointed, our only viable ask to the government now, is for the conditions that were included in the approval of the acquisition to have to be followed and to be enforced. Those are important conditions that need to be enforced. We’re hopeful they’ll be followed through, but we’re also concerned the government won’t follow through with them.
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