SORRY YOU SOLD THE CWB?
Many Saskatchewan farmers unable to fill grain contracts: industry survey

By Connor O’Donovan

Global News
December 2, 2021 

COLLECTIVE / COOPERATIVE HARVESTING 

ON THE PRAIRIES

Combines harvest a canola crop just outside Colonsay, Sask in this supplied photo. 

Grant Sinclair / Supplied

An Agricultural Producers Association of Saskatchewan (APAS) survey is shedding light on just how significant an impact the 2021 drought has had on some farmers.


The optional survey has so far received more than 200 responses, 75 per cent of which reported being unable to fulfil their 2021 grain contracts.

“Some respondents included that they are facing bankruptcy due to drought and contract shortfalls,” reads an APAS news release on the subject.

It says “25% of respondents also said they had trouble contacting the grain buyers resolving issues arising from production shortfalls, and many of the respondents said they will not be working with the same grain company in the future or will not be signing a contract again.”

READ MORE: Crop insurance and drought relief boosting Saskatchewan deficit: finance minister

Speaking to Global News Tuesday, APAS President Todd Lewis acknowledged that the drought meant fulfilling contracts hasn’t been easy for “either side” and added producers will likely be more cautious with their plans moving forward.

“It’s tough on the grain companies as well. They don’t want to be in this position but unfortunately the dry weather has come, the contracts are signed and now it’s time to settle these contracts and it’s not fun for either side,” he said, adding that difficult years are part of the industry and need to be accommodated.

“I think producers are looking for a better contract to sign going into next year. It’s still dry. We’re a long way form being out of this drought.”

READ MORE: Prairie livestock producers facing shortage of feed, water as winter sets in

The APAS release also points out producers with low yields have had to pay “penalties and administrative fees between $20,000 and $300,000 to grain companies.”

“Many of the respondents also said the interest on their unpaid contracts was as high as 19%,” the release continues.

1:47 Contract concerns mount as harvest produces low yields for some – Sep 2, 2021

Western Grain Elevator Association (WGEA) spokesperson Wade Sobkowich, meanwhile, said its the organization’s belief that some farmers “over-contracted” and took on too much risk.

“When a grain company needs to set replacement value to a farmer who doesn’t have enough production, it’s not because the grain company is making money. Grain companies are scrambling to have enough grain to meet their own commitments,” he said.

“Grain companies are buying those tonnes from other farmers at very high prices right now, we know that there are producers in Western Canada who are benefitting from not having taken on so much risk and not having forward contracted as much.”

He added, though, that WGEA members will be “examining their processes” when it comes contracting producers.

“It would be unwise for anybody to come out of an unprecedented situation like we’ve just experienced without trying to learn from it. But it’s a competitive issue,” he said.


READ MORE: Saskatchewan farmers hoping for wet winter after drought-ravaged summer

Saskatchewan Agriculture Minister David Marit said Tuesday his ministry has reached out both to producers and grain buyers to discuss the issue.

“I think you’ll see people looking at the contracts in a little more detail. We have as a ministry reached out to all of the grain companies to have this very discussion about this and did see that they’re trying to work with producers in a number of cases,” he said.

“Some of the owners or CEOs told me they’ve offered deferrals or reduced admin fees.”

1:45 Crop insurance and drought relief boosting Saskatchewan deficit: finance minister

The province announced earlier this week that crop insurance payouts were the highest per acre in 2021 that they’ve ever been.

Asked about mitigating the impact of continued or future droughts, which research has suggested will become more frequent due to climate change, Marit said he thinks Saskatchewan’s existing risk management options are “adequate”.

“The farmers have built up the crop insurance reserve. The farmers have the resources to recover those costs,” he said, adding though that rates may increase depending on how quickly climate change predictions play out.

“That’ll all be reflective in the premiums and the coverage and things like that. That’s something governments as a whole are gonna have to look at both from a federal perspective and a provincial perspective across Canada.”

CWB

The Globe and Mail reports, "Until Ottawa ended its monopoly in 2012, the Canadian Wheat Board was the prairie farmer’s link to food companies around the world. Now the former giant has been taken over by a U.S. agrifood company and an investment fund owned by Saudi Arabia.

Harper sells Wheat Board to US corporation & Saudi ...

canadians.org/analysis/harper-sells-wheat-board-us-corporation-saudi-investment-f…

'An attack on government': Saskatchewan finance minister rebuffs farmers concerns

Mickey Djuric
Publishing date: Dec 02, 2021 • 

REGINA — Recent comments made by Saskatchewan’s finance minister have inflamed farmers who say the government is creating an urban-rural divide that is harmful.

On Monday, Donna Harpauer presented her mid-year financial report showing a record $2.7-billion deficit, which she largely attributed to crop insurance claims brought on by severe drought.

More than $2.4 billion of crop insurance was paid out, the most in Saskatchewan’s history, and $1.8 billion of that had not been budgeted for, which largely contributed to the deficit.

When presenting her report, Harpauer said “without the agriculture support (expense), we’d almost be balanced.”

Ian Boxall, vice-president of the Agricultural Producers Association of Saskatchewan, said Harpauer’s comments are misleading and farmers should not be blamed for the province’s accounting decisions.

“The government is throwing producers under the bus,” Boxall said Wednesday.

“When urban people hear there’s $2 billion payout to farmers through crop insurance, that’s probably worrisome. What they need to understand is we pay the premiums in, and the money is actually there.”

Boxall said he wants to make it clear the money wasn’t a bailout from the government. For years, producers, along with the federal and provincial governments, have been paying into the crop insurance fund to ensure money is there when it’s needed.

“We paid in, and this year we have to pay out,” Boxall said.

Boxall’s group addressed its concerns in a letter to the government. Harpauer called it a disingenuous letter which dismayed her and she accused the group of being misinformed.

“It’s an attack on our government,” Harpauer said in a followup interview.

She co-penned a letter with Agriculture Minister David Marit to respond to the concerns. They accused the producers’ group of having a limited understanding of accounting principles and asked that the letter be retracted.

Asked if farmers should bite their tongues, she said: “Before they speak to us, and get an understanding, and not give out false information, yes.”

Boxall said producers have worked for years to eliminate the division between rural and urban residents and try to get people living in cities to understand the issues farmers face.

“I don’t want to have a bigger divide between rural and urban. We’re a small province, based on population, and we need to have similar goals and outlook of what’s good for the province,” Boxall said.

He said the letter was an attempt to educate the government on that point.

“That’s their concern,” Harpauer retorted. “We all — urban and rural — is well aware there was a … catastrophic, challenging year in agriculture this year. I’m not sure what their issue is.”

Premier Scott Moe weighed in on Thursday. He said the letters from the producers and Harpauer “were both factual.”

He said the letters could have been avoided if Boxall’s group had just picked up the phone.

“If you have questions, make a phone call, and we can have a phone call about how public sector accounting works here,” Moe said before reiterating similar comments made by Harpauer.

“If we could disregard … the support required to pay out to producers because of the program we have in place, Saskatchewan would be very close to having a very balanced budget this year, and I think that’s a positive thing.”

Todd Lewis, president of the producers’ group, followed up Thursday with a second letter to the finance minister.

He wrote that farmers do not want to be blamed for the deficit.

“Having these discussions without being accused of being deceitful, ignorant, or misinformed would be appreciated.”

This report by The Canadian Press was first published Dec. 2, 2021.

Agricultural producers association, Sask. government go back and forth on crop insurance's role in deficit

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Association was concerned with implication that crop

insurance payments caused provincial deficit

CBC News · Posted: Dec 02, 2021 

On Monday, Saskatchewan Finance Minister Donna Harpauer said the province's $2.7-billion projected deficit is largely due to $2.4 billion in crop insurance claims. (Kirk Fraser/CBC News

The Agricultural Producers Association of Saskatchewan (APAS) and the Saskatchewan government have been exchanging public words over how the province characterized the role of crop insurance payments in its recent mid-year budget update.

APAS says that many producers are worried about being considered a burden on the province's finances. 

On Monday, the government projected a $2.7 billion deficit in its mid-year update. Finance Minister Donna Harpauer said the shortfall is mainly because of an expected $2.4 billion in crop insurance claims. 

"If you backed out the expense of crop insurance — that $2.4 billion — as well as the livestock producer support, we would almost be balanced," Harpauer said during a news conference Monday. 

"That's how significant that support was for agriculture producers."

• Sask. announces more insurance supports for farmers battling drought

• Crop insurance claims push Sask. into record $2.7B deficit: mid-year financial report

APAS took exception to the implication that crop insurance payments are causing the provincial deficit.

"In 2020, Saskatchewan Crop Insurance Corporation reported a $2.4-billion surplus accumulated over previous years, plus a sizeable surplus in the reinsurance fund," APAS vice president Ian Boxall was quoted as saying in a news release Wednesday. "It's not fair to blame producers for a provincial deficit in a drought year when that surplus gets used up."

The province responded with its own news release later Wednesday, in the form of an open letter to APAS president Todd Lewis, signed by Agriculture Minister David Marit and Finance Minister Donna Harpauer. 

"I will begin by pointing out that we disagree with the premise of the entire document," the government response said. "To suggest that the provincial government is somehow blaming our agricultural producers for the financial deficit reported in the financial update presented earlier this week is not only false, it is offensive."

The province's letter said Boxall's comments suggest he is unfamiliar with the concept of summary financial reporting. It asked APAS to retract its statement.

"It is disappointing, to say the least, that an organization such as APAS would, through either ignorance or deceit, willingly misinform its members with such callous disregard," the province said.

APAS president Lewis then put out another news release Thursday responding to the province's Wednesday release.

"Although it may not have been the intention of the government to leave that perception, many media reports made that link," Lewis wrote.

"Pointing out that producers are not responsible for a deficit situation when previous year's results are taken into account is our organization's job."

Lewis wrote that he had personally received calls from concerned producers, as had APAS's office and other representatives.

"Producers are concerned that the general public has a perception that farmers are receiving a 'break' or a 'bailout' when they receive a crop insurance cheque," Lewis wrote.

A general lack of understanding of the accounting principles behind crop insurance is the main issue at hand, according to Lewis.

"I stand to be corrected on the operational side of the finance ministry and the use of summary financial statements.," Lewis wrote. "However, having these discussions without being accused of being deceitful, ignorant, or misinformed would be appreciated."

In an interview, Lewis said the purpose of Thursday's letter was to convey that APAS meant no offence to anybody with its initial release. 

He said it was meant to let members of the public know that farmers aren't being bailed out by the government, but rather there is a partnership between the government and producers where they pay for coverage, but only receive payment when they are in a claim position. He said it's like any other insurance program and in some cases producers have paid premiums for decades but never made a claim. 

"We wanted to let the public know and ensure that there's no misconceptions around the funding of crop insurance and tying it to the deficit," he said. 

Premier Scott Moe said that when insurance money is given to the agricultural industry, it has to be recorded as a financial expense, an accounting principle he said all provinces and the federal government follow. 

"I think all of the letters in this case really could have been avoided had a couple of phone calls ultimately been made," he said.

Junk Science: Ethanol

So who benefits from the Conservatives push for Ethanol? Big Agri-business, the opponents of the Wheat Board, and the Blogging Tories and their pals run the Canadian Renewable Fuels Association.

You have seen the CRFA ads on TV complete with a nerdy goof promoting Harpers 5% promise. That we will have 5% ethanol for cars in Canada. The guy has to be a Blogging Tory.

Gee I have heard that 5% promise before,about the GST, but that still hasn't happened either.

But does ethanol help the environment? Well like the Conservative government's Clean Air Act, the answer is no.

Mowhak and Petro-Canada have been selling Ethanol for years in Canada as an additive, and we still have air pollution and greenhouse gas.

Ethanol auto emissions no greener than gasoline: study

The federal Conservative government committed $2 billion in incentives for ethanol, made from wheat and corn, and biodiesel in last week's budget.

But based on Ottawa's own research, critics say the investment is based more on myth than hard science.

Scientists at Environment Canada studied four vehicles of recent makes, testing their emissions in a range for driving conditions and temperatures.

"Looking at tailpipe emissions, from a greenhouse gas perspective, there really isn't much difference between ethanol and gasoline," said Greg Rideout, head of Environment Canada's toxic emissions research.

"Our results seemed to indicate that with today's vehicles, there's not a lot of difference at the tailpipe with greenhouse gas emissions."

The study found no statistical difference between the greenhouse gas emissions of regular unleaded fuel and 10 per cent ethanol blended fuel.

Although the study found a reduction in carbon monoxide, a pollutant that forms smog, emissions of some other gases, such as hydrocarbons, actually increased under certain conditions.

Bill Rees, an ecology professor at the University of British Columbia and longtime opponent of ethanol, has read the report and thinks Canadians need to know its conclusions.

"I must say, I'm a little surprised at that, because it seems to fly in the face of current policy initiatives," he said.

"People are being conned into believing in a product and paying for it through their tax monies when there's no justifiable benefit and indeed many negative costs."

See

Bio Fuel

Bio-Fuels

ADM

Ethanol


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Canada, agriculture, wheat, Canadian Wheat Board, farmers, Western-Canada, barley, wheat, Strahl, Government, Conservatives, Harper, Elizabeth May, corn MexicoUSA, Bush, ADM, ethanol, biofuels,

Big Oil Rips Off Ethanol Subsidies

Talk about biting the hand that feeds you. Big Oil is using Ethanol subsidies, corporate welfare, to fight Ethanol blending. The U.S. taxpayer is subsidizing big oils fight against Ethanol another good reason NOT to have corporate welfare for Ethanol.

For some industries, the prospect of $3.5 billion in federal subsidies now, and double that in three years, might be a powerful incentive. But not, apparently, for the oil industry, which is seeing crude oil prices soar to record highs. Despite collecting billions for blending small amounts of ethanol with gas, oil companies seem determined to fight the spread of E85, a fuel that is 85% ethanol and 15% gas. Congress has set a target of displacing 15% of projected annual gasoline use with alternative fuels by 2017. Right now, wider availability of E85 is the likeliest way to get there.

At the same time the industry is collecting a 51 cents-per-gallon federal subsidy for each gallon of ethanol it mixes with gas and sells as E10 (10% ethanol and 90% gas), it's working against the E85 blend with tactics both overt and stealthy. Efforts range from funding studies that bash the spread of ethanol for driving up the price of corn, and therefore some food, to not supporting E85 pumps at gas stations. The tactics infuriate a growing chorus of critics, from the usual suspects—pro-ethanol consumer groups—to the unexpected: the oil industry's oft-time ally, the auto industry.

The industry collects the subsidies, but didn't lobby for them—Congress created them to encourage a larger ethanol market. While oil reps say they aren't anti-ethanol, they are candid about disliking E85. Says Al Mannato of the American Petroleum Institute (API), the chief trade group for oil and natural-gas companies: "We think [ethanol] makes an effective additive to gasoline but that it doesn't work well as an alternative fuel. And we don't think the marketplace wants E85."

One prong in the oil industry's strategy is an anti-ethanol information campaign. In June the API released a study it commissioned from research firm Global Insight Inc. The report concludes that consumers will be "losers" in the runup to Congress' target of 35 billion gallons of biofuel by 2017 because, it forecasts, they'll pay $12 billion-plus a year more for food as corn prices rise to meet ethanol demand. The conclusions are far from universally accepted, but they have been picked up and promoted by anti-ethanol groups like the Coalition for Balanced Food & Fuel Policy, made up of the major beef, dairy, and poultry lobbies. Global Insight spokesman Jim Dorsey says the funding didn't influence the findings: "We don't have a dog in this hunt."

SEE:

Bio-Fuel B.S.

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Canada, agriculture, wheat, Canadian Wheat Board, farmers, Western-Canada, barley, wheat, Strahl, Government, Conservatives, Harper, corn USA, Bush, ADM, ethanol, biofuels, primates, organutan, , ADM, ArcherDaniels Midland, , bio-fuels, Canada Wheat Board, , capitalism, Cargill, , ecology, , Environment, , Green, green capitalism, Indonesia, Kyoto, palm oil, , big oil, sustainable, workers control

YOU SOLD OUT THE WHEAT BOARD

Contract issue ‘settled’ for grain handlers

By Sean Pratt
JULY 6,2023

"It seems that grain contracts are very one-sided and actually represent a fairly significant financial risk to producers," said APAS president Ian Boxall. | File photo

A prairie farm organization says it is time for the federal agriculture minister to “weigh in” on grain contract protections for farmers.

The Agricultural Producers Association of Saskatchewan wants Marie-Claude Bibeau to instruct the Canadian Grain Commission to facilitate a meeting between farmers and grain companies with a goal of producing a fairer contract.

“It seems that grain contracts are very one-sided and actually represent a fairly significant financial risk to producers,” said APAS president Ian Boxall.

But grain companies don’t appear willing to chat.

“It’s an issue that is settled in our minds,” said Wade Sobkowich, executive director of the Western Grain Elevator Association.

His member companies are happy with the current commercial system where contracts are tailored to meet the needs and marketing strategies of each individual business.

Agriculture Canada shed little light on where it stands. It said it is modernizing the Canada Grain Act (CGA) to ensure the legislation is fair and responsive to the grain sector.

“The CGA already provides scope for contract arbitration and we are committed to ensuring a level playing field for farmers through the CGA review process,” it said in an email.

But APAS insisted that the playing field is lopsided.

It estimated Saskatchewan growers lost about $60 million when Purely Canada Foods informed 26 farmers in March that it was voiding their gluten-free oat contracts because a processor could not take them.

That incident follows “hundreds of millions” of dollars lost on buyouts, administration fees and legal costs when farmers experienced drought in 2021 and were unable to deliver their contracted production.

Boxall doesn’t want contracts to be so restrictive that buyers and sellers cannot negotiate terms, but he would like to see some standardization in terms of penalties, administration fees and the general layout of contracts.

He wants a contract from Viterra to look the same as one offered by Parrish and Heimbecker, so farmers know what they are signing and do not have to consult a lawyer.

Australia and other countries have adopted standardized grain contracts.

Boxall said producers will always take on some risks when signing contracts, but it has become far too unbalanced.

“Right now, it’s probably 99 percent of the risk to the farmer and one percent risk to the buyer,” he said.

“It seems to be a little bit offside.”

He hopes producers and grain companies can come to terms on a contract where the risk split is more like 80-20 or 70-30, or something similar.

Sobkowich said the APAS suggestion sounds like an attempt to transfer crop production risks to grain companies.

“It (is) a risk that farmers assume, and we think that’s where it rightly stays,” he said.

He rejected notions that farmers take all the risk in grain transactions.

“The producer that made that comment doesn’t understand the risk associated with moving grain through the rest of the system,” said Sobkowich.

He encouraged growers to think about what happens when China bans Canadian canola when ships are en route to that destination, or when there is a washout or blockade of a rail line, or a strike at the port.

“There’s a ton of risk in the supply chain,” he said.

“When there’s a hit down the road with that cargo, you don’t see the grain companies coming back to the farmer.”

Sobkowich said if grain companies are forced to take on some of the production risks of growing a crop, it will result in discounted prices.

Boxall said he is simply asking for a dialogue. He does not want to “ramrod” anything down anybody’s throats.

He believes grain companies will benefit from increased contract transparency because farmers are shying away from forward contracting after the 2021 problems.

“It’s time to find a solution to this longstanding problem,” he said.

Sobkowich said the grain industry is one of the most heavily regulated sectors in the Canadian economy and it doesn’t need further constraints.

He said the existing commercial system for contracting allows companies to be more flexible and responsive to the needs of their customers.

He said the contracting issue has not been the subject of much debate around the WGEA board table despite a series of resolutions passed by Saskatchewan crop organizations calling for fairer contracts.

“Grain companies can’t get together and talk about their contracts with each other,” said Sobkowich.

“That would be collusion.”

Life after the wheat board | The Western Producer

MONOPOLY CAPITALI$M

Bunge and Viterra sign merger agreement to create global agribusiness giant

Amanda Stephenson, The Canadian Press   Jun 13, 2023

A US$8.2-billion merger between U.S. company Bunge Ltd. and Viterra Ltd. will create a global agricultural giant in an industry that has already seen a significant amount of consolidation in recent years.

The deal was announced Tuesday by the Missouri-based Bunge — which is the world's largest oilseeds processing company, operating 300 facilities in more than 40 countries worldwide — and Viterra, which is owned by Swiss commodities giant Glencore, as well as the Canada Pension Plan Investment Board and B.C. Investment Management Corp.

Under the terms of the agreement, Viterra's shareholders will receive 65.6 million Bunge shares, valued at a total of about US$6.2 billion, and about US$2.0 billion in cash. Bunge will also assume US$9.8 billion of Viterra debt.

Viterra shareholders will own 30 per cent of the combined company on a fully diluted basis when the deal closes and about 33 per cent after completion of a planned US$2-billion share repurchase plan by Bunge.

Viterra, formerly the iconic Saskatchewan Wheat Pool, is a grain-handling business that has more than 80 facilities across the country and exports into more than 70 countries. 

According to the companies, the merger will bring together Bunge and Viterra’s complementary asset footprints, augmenting Bunge's grain and softseed handling capacity and helping to connect the world's largest agricultural regions with consumers around the globe.

“The combination of Bunge and Viterra significantly accelerates Bunge’s strategy, building on our fundamental purpose to connect farmers to consumers to deliver essential food, feed and fuel to the world," said Greg Heckman, Bunge CEO, in a news release.

The merger will offer farmers greater market access for their products, the companies added. 

"This further enables us to offer innovative solutions and open additional pathways for our customers," said Viterra CEO David Mattiske.

However, the merger is also part of an ongoing wave of consolidation in the agriculture sector in recent years. Among notable mergers have been German company Bayer's 2018 US$66-billion blockbuster deal to acquire Monsanto, as well as the 2018 merger between Agrium Inc. and PotashCorp of Saskatchewan, which created Nutrien Inc., the largest potash producer in the world today.

Viterra itself was acquired by Glencore in 2012 for $6.1 billion. Glencore later sold a 40 per cent stake in the company to CPP Investments and a nearly 10 per cent stake to B.C. Investment Management in 2016.

On Tuesday, the federal Competition Bureau confirmed it will be reviewing the proposed Viterra-Bunge merger in accordance with the federal Competition Act.

"The Bureau has a mandate to review mergers to determine whether they are likely to result in a substantial lessening or prevention of competition," said spokesman Jayme Albert in an email. 

"Should we determine that the proposed transaction is likely to harm competition, we will take appropriate action."

One potential sticking point for regulators could be the fact that Bunge already owns a 25 per cent stake in G3 Global Grain Group, which was once the Canadian Wheat Board. G3 operates grain elevators in many of the same regions as Viterra.

Shannon Sereda, director of government relations, policy and markets for the Alberta Wheat Commission, said her organization is monitoring the proposed deal.

"Our mandate is to support competitive markets for our farmers, so as more details emerge, we'll of course be looking to study the impacts of the merger," she said in an interview. 

"But it's very early days."

CPP Investments said Tuesday it expects to receive about a 12 per cent stake in the combined company and US$800 million in cash in exchange for its interest in Viterra.

The merger is expected to close in the middle of 2024, subject to customary closing conditions, including regulatory approvals and approval by Bunge shareholders.

The combined company will be led by Heckman and Bunge chief financial officer John Neppl, while Viterra chief executive David Mattiske will become co-chief operating officer.

The board of the combined company is expected to include eight Bunge nominated directors and four nominated by Viterra shareholders after the deal is completed.

CME Group fines Andersons Inc $2 million for wheat trading violations

CRIMINAL CAPITALISM BUSINESS AS USUAL

CHICAGO (Reuters) - CME Group (CME.O), parent of the Chicago Board of Trade (CBOT), has ordered The Andersons Inc (ANDE.O), an Ohio-based grain business, to pay a $2 million fine for violating futures trading rules in late 2017, the exchange said in a statement on Friday.

The Andersons confirmed the settlement in a statement to Reuters and said it cooperated with the CME’s investigation.

“We do not believe we engaged in any wrongdoing,” it said in the statement.

The 6th-largest U.S. commercial grain handler by capacity operates several Ohio grain warehouses that also serve as delivery points for CBOT wheat futures.

According to CME, The Andersons registered 2,000 contracts of wheat certificates for delivery against CBOT December 2017 wheat futures on Nov. 29, 2017 - a day before the first notice day for deliveries – in an effort to manipulate the spread, or price difference, between futures contracts.

At the time, the wheat registrations surprised traders, and CBOT December futures fell sharply the next day, widening the price spread between the December and back-month contracts. The exchange said The Andersons placed bids in futures spreads in anticipation of the market impact of its delivery registrations.

A large number of CBOT delivery registrations can signal that end-users such as flour mills are amply supplied and that there is plenty of wheat to go around. That information, in turn, can depress futures prices.

“The Andersons registered the certificates with the belief that the wheat spread would widen and trade into its resting bids. The Andersons then re-purchased certificates at reduced prices,” the CME Group statement said. In the month leading up to the first notice day, the Andersons sold wheat to flour mills in the Toledo, Ohio, area in order to limit demand for the grain, the CME statement said. Such a move could further support the perception of weak cash-market demand, one trader said.

Your Daily Bread Will Now Come From Fewer Hands

MONOPOLY CAPITALI$M USING WORKERS CAPITAL

Analysis by Javier Blas | Bloomberg
June 13, 2023 
(Source: Bloomberg research and company reports)

It hardly generates headlines, but it puts your daily bread on the table. 

The grain-trading industry is one of the most inconspicuous — and yet crucial — businesses powering the global economy. And it just witnessed its biggest shakeup in a generation.

Bunge Ltd., a US-based food trader and processor, is buying rival grain trader Viterra, which is controlled by commodity behemoth Glencore Plc and two Canadian pension funds. 

The price tag is $8.2 billion in shares and cash, plus debt. When the deal closes, likely in 2024, Bunge’s shareholders would control about two-thirds of the company, and Glencore and the Canadians the rest.

The resulting entity would become the world’s second-largest agricultural trading company by revenue, dominating the soybean and wheat markets. It’s a consolidation that should concern antitrust regulators — and worry anyone who eats or farms.

For the last quarter of a century, four companies have largely controlled the agricultural market. The quartet comprises Archer-Daniels-Midland Co., Bunge, Cargill Inc., and Louis Dreyfus Co. — or “ABCD” for short. 

Now the “B” is getting a lot larger, overtaking the “A”, and only trailing the “C”; the concentration has boosted margins, particularly in the last couple of years, when record earnings were the norm.

Cargill became the king of agricultural commodities by buying another “C,” in this case the grain-trading business of Continental Grain Co. in 1998 for about $450 million, plus inventories and debt. 

It was the last big industry shakeup and one that prompted regulatory scrutiny. Ultimately, the US Department of Justice forced Cargill to sell some assets, arguing that without the remedy, “many American farmers likely will receive lower prices for their grain and oilseed crops, including corn, soybeans, and wheat.”

Antitrust regulators should take a similarly aggressive approach 25 years later.

 Crucially, the Bunge-Viterra merger isn’t just two companies getting together, but, in reality, four of them. That’s because Viterra is the product of an M&A race that started in 2012 when Glencore bought the original Viterra for about $6 billion. 

Soon after, in 2016, Glencore spun off the enlarged business, attracting two Canadian pension funds that took almost half of the shares. The new entity kept the Viterra name and bought US-based trader Gavilon in 2022 for about $1.1 billion.

Together, Bunge plus Glencore-Viterra-Gavilon would have had revenue of about $140 billion last year, above the $102 billion of Archer-Daniels-Midland, and just under Cargill’s $165 billion. 

Adjusted net income would have been around $3 billion, and underlying earnings, excluding interests, taxes and depreciation, would have come in close to $5.5 billion.

Bunge and Viterra claim that their geographical footprint is complementary, with little overlap. That’s technically true, but only if regulators consider, for example, the US and Canada as separate markets, or that Argentina and Brazil have little in common. 

I doubt regulators would take such approach.

“We’ll have to file in a number of jurisdictions, because of the footprint of both companies. I will never predict regulatory timelines,” Greg Heckman, Bunge’s chief executive officer, told shareholders in a conference call after the deal announcement. “We will see how it plays out.”

Both Bunge and Viterra are important for China, and Beijing will also likely take a hard look at the deal. China is trying to expand its own state-controlled global grain trader.

It isn’t just horizontal consolidation, over geography, but also vertical, up and down the supply chain. Bunge is more weighed toward processing, and Viterra towards trading.

Together, they would control a larger share of the path from farm to fork. 

Farmers and the food companies that are the clients of the traders would all have significantly less choice going forward.

The Bunge-Viterra deal makes sense from a business perspective, even if the former is buying the latter at the top of the cycle. But it requires robust due diligence from regulators. 

Last year, the International Monetary Fund described the commodity-trading industry as one of those “corners of global financial markets that were little known by the broader public.” 

That should not be the case.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Javier Blas is a Bloomberg Opinion columnist covering energy and commodities. A former reporter for Bloomberg News and commodities editor at the Financial Times, he is coauthor of “The World for Sale: Money, Power and the Traders Who Barter the Earth’s Resources.”

CPP Investments to Acquire 12% Position in Bunge through Viterra Merger


NEWS PROVIDED BY

Canada Pension Plan Investment Board

13 Jun, 2023, 06:35 ET

CPP Investments holds a 40% equity stake in Viterra

TORONTO, June 13, 2023 /CNW/ - Canada Pension Plan Investment Board (CPP Investments) today announced it has signed a definitive agreement in support of the proposed merger between Viterra and Bunge (NYSE: BG), an agriculture, commodities and food company. Through this transaction, CPP Investments will receive an approximate 12% equity position in the combined company and US$0.8 billion in cash upon the close of the transaction. CPP Investments has held a 40% investment in Viterra since 2016.

Bunge is a leader in oilseed processing and a significant global producer and supplier of specialty plant-based oils and fats. Viterra is a leading, global agriculture network, which connects producers to consumers with sustainable, traceable, and quality-controlled agricultural products. Together, the agribusinesses have highly complementary capabilities and footprints, and together will be able to better serve customers from an enhanced global network and increased diversification across geographies, seasonal cycles and crops.

Glencore and British Columbia Investment Management Corporation, who jointly own the other 60% of Viterra, will also become shareholders of Bunge.

"Since 2016, CPP Investments has supported Viterra on its journey to becoming a leading global agriculture business. We are pleased to support the business in its next phase of growth through this merger with Bunge," said Bruce Hogg, Managing Director, Head of Sustainable Energies, CPP Investments. "Combining these two highly complementary companies will create an enhanced agribusiness that can provide an expanded product offering to end-customers, with an increased ability to innovate and promote sustainable practices in the global food supply."

The transaction is expected to close in mid-2024, subject to the satisfaction of customary closing conditions, including receipt of regulatory approvals and approval by Bunge shareholders.

The Sustainable Energies group pursues investments in renewable and conventional energy, carbon capture, distributed and energy services, emerging and disruptive technologies, as well as agriculture. As at March 31, 2023, the Sustainable Energies group portfolio totalled C$32 billion in net assets.
About CPP Investments

Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Fund in the best interest of the more than 21 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm's length from governments. At March 31, 2023, the Fund totalled $570 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Facebook or Twitter.

Viterra-Bunge Merger Proposal Backed by Canadian Pension Funds

Paula Sambo, Bloomberg News

Workers unload soybeans at a Viterra grain elevator near Rosser, Manitoba, Canada, on Friday, March, 18, 2022. The United Nations warned that already record global food costs could surge another 22% as the war in Ukraine stifles trade and slashes future harvests. , Bloomberg

(Bloomberg) -- A merger between Glencore Plc’s Viterra unit and Bunge Ltd. to create a $25 billion agricultural trading behemoth has the support of two of Canada’s biggest pension funds, according to a person with direct knowledge of the matter.

Canada Pension Plan Investment Board and British Columbia Investment Management Corp. are willing to swap their combined 49.98% stake in Viterra for investments in the merged entity, said the person who asked not to be named discussing a private deal.

Spokespersons for the two pension fund managers and Viterra declined to comment.

A merger would create a trader big enough to take on the industry’s elite: Cargill Inc. and Archer-Daniels-Midland Co. Viterra and Bunge are negotiating the structure of a potential transaction, Bloomberg reported last week. One option being discussed envisions a stock deal where Bunge shareholders would own a majority of the combined group, according to the people.

Read More: Bunge-Viterra Deal Would Create $25 Billion Rival to Cargill

Glencore has flirted with the idea of a deal with Bunge on and off for years, and there’s no certainty it will be able to reach an agreement this time around. In 2017, the Swiss commodities giant approached Bunge about a friendly takeover, but was publicly rebuffed by the US firm. Since then, Bunge has replaced its new chief executive officer and other senior executives.

Canada’s Globe and Mail newspaper reported Monday that the Canadian pension funds would almost certainly swap their stakes for a stake in Bunge, citing people close to deal talks. Glencore Plc, with a 49.99% stake, would do the same, the newspaper reported.

--With assistance from Isis Almeida and Layan Odeh.

(Updates with background details in fourth paragraph)

©2023 Bloomberg L.P.

 

Viterra

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From Wikipedia, the free encyclopedia

Viterra

Type	Privately Held
Industry	Agriculture
Founded	1993
Headquarters	Rotterdam, Netherlands
Key people	Kyle Jeworski
Website	www.viterra.com

Viterra began as a Canadian grain handling business, the nation's largest grain handler, with its historic formative roots in prairie grain-handling cooperatives, among them the iconic Saskatchewan Wheat Pool.^[1] Viterra Inc grew into a global agri-business with operations in Canada, the United States, Australia, New Zealand and China. Viterra operated three distinct, inter-related businesses: Grain Handling & Marketing, Agri-Products and Processing, enabling it to generate earnings at various points on the food production chain from field to the table. Following its $6.1-billion acquisition by Glencore International, on 1 January 2013, Viterra was merged with Glencore purchaser, 8115222 Canada Inc.,^[1] headquartered in Rotterdam, the Netherlands.

Viterra's grain handling and marketing operations were located primarily in two of the world's most fertile regions: Western Canada and South Australia. The company owns and operates grain terminals in Western Canada, along with 95% of the grain handling and storage facilities in South Australia. The company ships grain to markets worldwide.^[2]

Viterra was also one of the largest agri-product retailers in Canada, with a network of more than 250 retail locations throughout the Prairies. As part of this business, Viterra owned a 34% interest in Canadian Fertilizer Limited CFI, a large urea and ammonia plant.

The company also operated several value-added processing businesses, including wholly owned subsidiaries like Dakota Growers Pasta Company, 21st Century Grain, making it the largest producer of industrial oats in North America, the third largest producer of pasta on the continent, the largest malt producer in Australia, a large producer of canola and a leading producer of animal feed in New Zealand.

At the time of the Glencore's March 2012, back-to-back purchase-and-agreement of Viterra's assets to Agrium, which paved the way for Glencore's purchase of Viterra, in December 2012, Viterra was generating "$2.4-billion in revenue and $244-million in EBITDA" and operated a "network of 258 agri-products retail locations throughout Western Canada and 17 retail locations in Australia. Retail locations offer fertilizer, crop protection products, seed and equipment to growers. Viterra also has a minority interest in a nitrogen fertilizer manufacturing plant in Medicine Hat, Alberta."^[3]

History[edit]

Viterra Inc. was formed in 2007 as a publicly traded corporation when the Saskatchewan Wheat Pool acquired Agricore United, which was at that time the largest grain handler in Western Canada. Viterra's predecessors were the grain-trading co-operatives set up in Canada during the 1920s known as the wheat pools. It has since acquired the former Australian government-sponsored monopsony marketing board, the Australian Barley Board, created in 1939.

Grain Growers Grain Company (1906-2008)

Saskatchewan Cooperative Elevator Company (1911–1926)

United Grain Growers (1917–2001)

Saskatchewan Co-Operative Wheat Producers (1923–1953)

Alberta Wheat Pool (1923–1998)

Manitoba Pool Elevators (1926–1998)

Australian Barley Board (1939–1999)

Sask. Wheat Pool (1953–2007)

Agricore (1998-2001)

AusBulk formerly South Australian Cooperative Bulk Handling (SACBH) (?-2004)

United Grower Holdings (?-2004)

Agricore United (2001–2007)

ABB Grain (1999–2009)

VITERRA (2007-2013)

 

Mergers

Viterra building near Fort Road in Edmonton, Alberta.

On 19 May 2009, Viterra announced it would buy Australian ABB Grain for C$1.4 billion.^[4] On 9 September, 84 percent of ABB shareholders voted in favour of the merger, with 75 percent required to pass the resolution.^[5]

On March 15, 2012, Viterra announced that it had received takeover offers from multiple parties.^[6] Glencore was revealed to have offered a takeover bid of $6.1 billion.^[7] It intended to immediately sell off its Canadian assets to Agrium and Richardson International while retaining Viterra's overseas assets.^[8] The takeover deal was completed in December 2012.^[9]

Following Glencore's takeover of Viterra in December 2012, Viterra underwent some major changes. Viterra Inc. (Viterra) was acquired by a Glencore purchaser, 8115222 Canada Inc. and merged under the Canada Business Corporations Act (CBCA). The new board of directors includes Mr. Chris Mahoney (Director of Agricultural Products of Glencore), Mr. Ernest Mostert (Financial Manager of Glencore Grain), Mr. Robert Wardell and Mr. Larry Ruud (President & CEO One Earth Farms Corp).^[10]

In preparation for Glencore's acquisition of Viterra in December 2012, in March 2012, Agrium Inc entered into a $1.15bn sale agreement with Glencore, who in this way divested "90 percent of Viterra’s Canadian retail facilities, all of its Australian retail facilities, as well as their minority position in a nitrogen facility located in Medicine Hat, Alberta."^[3]

In 2016, Glencore sold a minority stake in the business to the Canada Pension Plan, who paid "US$2.5 billion for a 40 percent stake" in its global agricultural assets, by then renamed "Glencore Agriculture".^[11]

In 2020, Glencore Agriculture rebranded to Viterra and created a new brand identity, building off the Viterra brand that was created in 2007.^[12]

In 2022, Gavilon was purchased by Viterra for $1.1 billion. It is expected Gavilon will be fulling integrated in Viterra by early 2023.^[13]

In 2023, a merger with Bunge Limited was announced.^[14]