September 16, 2011


Viterra: Grain industry consolidation not likely in Canada



Viterra says that the world grain industry will see further consolidation, but Canada is not a target for multinational companies to expand their market share.


The president and chief executive of Viterra, said he expects more consolidation in the grain industry, but exporting nations such as Australia and US are more obvious targets than Canada for international companies hoping to expand their operations.


Other regions, including the Black Sea, India and China are also obvious targets for investment.


"We believe there will be further consolidation in a couple of major export markets, which would both be the US and in Australia," he said.


"We wouldn't suggest that anything is immediate but certainly the structure of the US industry with many different private companies, co-operatives and a number of smaller organizations. We would expect to see consolidation in that market".


Unlike Canada, where three major exporters control roughly 80% of the country's grain and oilseed exports, the US still has a large number of smaller regional grain companies, he said.


Those companies are likely to combine forces or look for other ways to gain access to global markets.


"We think the US consolidation will occur similar to Canada where smaller regional co-ops merged," he said.


"It's the same thing that happened here in Canada with the Saskatchewan Wheat Pool, Alberta Pool and Manitoba Pool," he said.


"Although large in their own particular sphere of influence, (they are) much, much smaller organizations compared to the global giants today."


He did not say that Viterra was seeking to acquire additional assets in the US or Australia.


Instead, he suggested that the company will be watching developments closely.


Regarding proposed marketing changes in Canada, he said Viterra supports Ottawa's plan to end the Canadian Wheat Board's single desk marketing powers.


The company will work with government, industry players and the CWB to ensure that the Canadian grain industry remains a competitive source of agricultural products.


Although changes to the CWB are expected to have a positive impact on the company's bottom line, he said it is too early to measure the benefits to the company's operations.


The changes to the monopoly will have a number of important and lasting benefits.


The (post single-desk) industry should have more flexibility and leaders like Viterra should be able to maximize our logistical capabilities and improve efficiencies with increased throughput velocity.


He also suggested that the elimination of the single-desk marketing system could generate interest from multinational companies that currently don't have a significant grain buying presence in Western Canada and added that the grain industry in Western Canada is already well developed and has excess capacity.


Significant consolidation has also taken place in recent years so multinational companies looking to make inroads into the Canadian market would be required to make large investments in a highly competitive environment that is already dominated by a handful of large companies.


"We're in an industry in Canada that's very mature," he said


"The business up here is really cycling 100 car units from origin to port so it would probably be unlikely for someone to come in and build both country and port infrastructure that would put the system into overcapacity and obviously affect margins and expect the type of returns that are necessary to compete in this industry."

Video >

Follow Us