Viterra deal raises competition fears
Report says Agrium may be able to hike nitrogen prices
Saskatchewan farmers stand to benefit on many fronts — but could lose out on others — if Glencore’s $6.1-billion takeover of Regina grain handler Viterra Inc. goes ahead, says a report by the province Friday.
The report by Informa Economics, commissioned by the province, says the transaction will probably improve Saskatchewan farmers’ ability to export their crops worldwide and cement the province’s reputation as being open for business.
But it says the deal, in which Glencore would sell a large chunk of Viterra’s Canadian business to Calgary-based Agrium Inc., raises some concerns about competition for crop nutrients such as nitrogen.
The effect on employment in the province is expected to be mixed and the effect on provincial coffers is expected to be modest.
“There’s a positive side to this, and there’s concerns that we still have,” Agriculture Minister Bob Bjornerud told reporters.
It’s up to Ottawa to make the decision as to whether or not the transaction represents a net benefit to Canada.
If the federal government approves the deal, Saskatchewan would want to see conditions that make sure Glen- core sticks to its commitments, like keeping a head office presence in Regina.
The deal will give Saskatchewan farmers better access to international markets just as the Canadian Wheat Board’s (CWB) monopoly over the sale of wheat and barley comes to an end, the report said.
It also has “generally positive” implications for Saskatchewan’s position in the international grain industry.
“The acquisition by Glencore will tie Saskatchewan agriculture into a leading international agricultural commodity marketing network, which will be much needed in a post-cwb environment,” it said.
“Glencore is particularly strong as a marketer of wheat into the Middle East, North Africa and Southern Europe, and it has a strong presence in grains in the (European Union). Glencore also has offices in Turkey, Egypt, Dubai and Morocco, where it has the ability to discharge and store wheat at destination.”
The Competition Bureau isn’t challenging Glencore’s takeover of Viterra.
But separately, it will weigh the sale of parts of Viterra’s business to Winnipeg-based Richardson International and Agrium.
One concern flagged in the report is that Agrium might be able to raise nitrogen prices, since the deal will make it even more vertically integrated in the farm-inputs industry.
It’s already a big producer and wholesaler of fertilizer, and the deal will lead to a larger retail footprint.
“Farmers are always concerned about input costs, as they’re high across the province now and have been in the past from time to time,” Bjornerud said.
The report says there’s no evidence Agrium intends to jack up fertilizer prices, and that the company’s structure provides safeguards against such behaviour.
It said the sale of grain elevators to Richardson is expected to have a “minimal” effect on competition in the grain-handling industry.
The deal’s effect on employment is expected to be mixed, with jobs at grain elevators, retail facilities and processing plants remaining unchanged.
It could result in some head-office job losses, but highly paid Viterra executives who had been based in Calgary will probably move to Regina, where Glencore intends to set up a base for its North American agriculture operations.