This deal could cost grain producers about $770 million annually, research said
Canada’s agriculture sector is disappointed with the federal government’s decision to approve Bunge’s $8.2 billion acquisition of Viterra.
“This is a missed opportunity to protect competition in Canada’s grain sector and prioritize the interests of producers who grow the food that Canada and the world rely on,” Kyle Larkin, executive director of Grain Growers of Canada, said in a statement. “We are urging the government to revisit these conditions, strengthen measures to foster competition, and take meaningful steps to support Canada’s grain farmers.”
The federal government believes this deal is a good one.
The terms and conditions of the agreement ensure competition is protected and provides farmers with a “wide range of competitive options when they sell their canola and other crops, as well as continue to receive fair prices for their produce,” Transport Canada said on Jan. 14.
Details of the agreement include Bunge’s divestiture of six grain elevators in Western Canada, legally binding controls on its minority ownership stake in G3, and committing to retaining Viterra’s head office in Regina for at least five years.
In total, the deal includes more than 20 conditions.
Bunge announced in June 2023 that it and Viterra had “entered into a definitive agreement.”
That August, both parties notified Canada’s minister of transport about the proposed acquisition.
Since then, the Competition Bureau of Canada and University of Saskatchewan conducted studies about how this kind of deal would affect Canada’s grain sector.
And both reports highlighted potential problems.
The University of Saskatchewan’s March 2024 study, for example, revealed this deal “reduces grain producer income by approximately $770 million per year.”
To put that number into perspective, the top three crop and livestock commodities by average 2019-2023 farm cash receipts for Nova Scotia, P.E.I., and Newfoundland and Labrador combined is just under $800 million.
The university also highlighted that the merged company may not have incentive to build new facilities.
“We also flag our concern that the merger may be a means for Bunge, in particular, to prevent competition from what would be the world’s largest canola crush facility, built by Viterra in Regina,” the report says.
The Competition Bureau’s report came out in April 2024, and it too suggested this acquisition would result in an overall negative outcome.
“The Bureau determined that the transaction is likely to harm competition in markets for grain purchasing in Western Canada, as well as for the sale of canola in Eastern Canada,” the bureau said, adding that Bunge could influence behaviour at G3, one of Viterra’s competitors.
Given these serious concerns, the Canadian ag industry is confused about why this deal received federal support.
“Our concerns from the beginning were that this deal would not be in the best interests of farmers and the fact that Bunge has maintained its minority ownership stake in G3 certainly furthers those concerns. Unfortunately, at the end of the day, it is the farmers who will pay,” Keith Currie, president of the Canadian Federation of Agriculture, said in a statement.
Online, some producers are expressing concern.
Large transactions like these rarely benefit the producer, one user said on Agriville.com.
“When there is talk of synergies, and talk of lower costs because of the merger, when merging two companies, they never mention who those synergies are going to be good for (not the farmer),” user SmallTimeOperator wrote. “I wish more producer owned terminals were able to survive. Seems they keep getting sold to the silent corporate partner who already owns a network of terminals.”
Another user, identified as rodd, isn’t as worried as others might be.
“This first 33 years of my farming career I dealt with zero competition in the wheat/barley market,” he said. “Since 2012 our farm has done very well. So, I’m not sure how “less” competition will hurt me. It can’t get any worse than what it was before 2012.”