Global grain giant Bunge Global SA BG-N is acquiring one of the largest and last remaining independent elevators in Canada, furthering its market presence and once again raising questions about mounting consolidation in the grain industry.
The purchase of North West Terminal (NWT) in Unity, Sask., will bring back online an elevator that has been stalled for a year, connecting it to Bunge’s expansive network, Bunge in Canada head Kyle Jeworski said in a press release.
Farmers, analysts and researchers across Western Canada are conflicted.
On the one hand, the reopening of the grain terminal is good news. The elevator serves a huge production area and its closing hurt farmers, said Kyle Larkin, executive director of Grain Growers of Canada.
But the news also emerges a few months after Bunge completed its merger with Viterra Inc., a grain handler with the most elevators in Canada. Mr. Larkin and analysts see this as an inevitable consequence and a furthering of market consolidation.
“Having a significant grain terminal that is open versus closed is always going to be a benefit,” said Mr. Larkin, adding that it is nevertheless “a story of decades if not centuries of consolidation.”
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North West Terminal suspended all grain purchases from farmers and let its primary elevator licence expire in September, 2024.
The news was not a surprise, said Brenda Tjaden, an agriculture market analyst and consultant. The dissolution of the Canadian Wheat Board in 2012 ignited fierce competition from international conglomerates and drove negative margins that lasted longer than ever before, she said. Prior to 2012, a downturn typically lasted three to five years. The current downturn has lasted eight years.
Independent grain elevators didn’t stand a chance, she said. Especially because they don’t have their own port infrastructure.
NWT had accumulated $28-million in losses since 2016 and had a standing loan with the Bank of Montreal for more than $41-million. (Competition wasn’t the only challenge facing NWT. There have been some questions about company management.)
The acquisition brings the NWT elevator into Bunge’s expanding network. Bunge is a major shareholder in G3, which operates Canada’s largest grain export terminal in Vancouver. On July 2, Bunge also completed its US$34-billion merger with Viterra. Viterra owns 65 elevators across the country, according to Aug. 1 numbers from the Canadian Grains Commission (CGC) online database. Bunge owns one.
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This is therefore a strategic move with big benefits for Bunge, said Marlene Boersch, a former grain trader and founder of agricultural market intelligence company Mercantile.
“Bunge, after the acquisition of Viterra, is clearly solidifying their sourcing and position in the Canadian industry,” she said.
And in some ways, this is good news for farmers, said Mr. Larkin. With a sizable storage capacity of 63,000 metric tonnes, the NWT elevator is important to many Saskatchewan producers who, since it closed a year ago, have incurred hefty costs from transporting grain to elevators further afield.
Farmers also still have a number of options when it comes to buyers. There are 336 primary elevators storing 8,175,928 tonnes of grain in Canada, according to the CGC database.
The merger and NWT acquisition means Bunge will have 14.8 per cent of the grain storage capacity in the country. Major players including Richardson International Ltd., Parrish and Heimbecker Ltd., and Cargill, alongside smaller players, make up the remainder.
But this latest news from Bunge nevertheless speaks to a self-fulfilling cycle, said Jared Carlberg, agricultural economist at the University of Manitoba.
As the industry consolidates, only major players can afford to survive, which justifies acquisitions and mergers on the basis of market survival, which in turns makes it even harder for small operations to survive, he said. And farmers get lost in the middle.
A University of Saskatchewan study on the economic impact of the Bunge-Viterra merger on the grain sector in Western Canada found that the costs to producer income could be reduced by approximately $770-million a year.