Bunge-Viterra consolidation could cost farmers more than $700 million per year: U of S report

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Bunge’s proposed acquisition of Viterra could result in more than $700 million in annual economic losses to farmers, according to a new report authored by researchers at the University of Saskatchewan.

The study, conducted by Drs. Richard Gray, James Nolan, and Peter Slade, received research support from the Agricultural Producers Association of Saskatchewan (APAS), Alberta Grains, Sask Barley and Sask Wheat.

The authors used several models to project the impact the merger could have on farmgate revenues in three main areas: export basis due to concentration at the Port of Vancouver, canola prices as a result of crush consolidation, and overall impact on primary elevator competition across the Prairies.

Since Bunge owns a 25 per cent stake in G3, a marriage with Viterra would result in Bunge having a stake in over 40 per cent of export capacity in Vancouver, the report notes. The authors make the assumption that G3, which has the largest port facility in Vancouver, and Viterra, the largest grain shipper from the port, would operate as a single entity if the merger goes ahead. They say this would increase the export basis through Vancouver by 15 per cent or $7 to $8 per tonne, reducing farm receipts in Western Canada by $570 million per year.

As for domestic competition for canola, the report says consolidation in canola crushing would increase canola crush margins by 10 per cent, and significantly reduce the incentive for Viterra to build its proposed canola crush facility in Regina, Sask. The merger simulations used in the report project an average canola price decrease of $8 to $10 per tonne, costing canola growers a total of $200 million to $250 million per year by 2025.

The authors’ analysis of primary elevators owned by Viterra and Bunge/G3 across the Prairies shows two regions in Alberta — an area north of Lloydminster and an area between Red Deer and the Saskatchewan border — would go from having two to only one grain buyer within 100km. They estimate the reduction in overall elevator competition across the Prairies would reduce farmgate prices by an average of $1 to $2 per tonne, or approximately $75 to $150 million per year.

The U of S report echoes some of the findings in the Competition Bureau report published last week, which specifically noted concerns about decreased competition for canola.

“The results of both of these studies validate concerns producers have been raising about the impact of the proposed merger on competition in the grain handling industry and ultimately returns to farmers,” noted Jake Leguee, Sask Wheat chair, in a news release on Monday.

“The proposed merger brings to the forefront concerns about market concentration and its potential ripple effects on grain producers,” added Tara Sawyer, Alberta Grains chair. “Competition in the grain sector will directly influence concerns producers have raised regarding transparent, consistent, and efficient delivery contracts and market information.”

Responding to the U of S report on Tuesday, a spokesperson for Bunge said the authors were “working with sparse data and have made assumptions about how port terminals operate and about behavioral relationships.”

They noted that Competition Bureau concluded there were “no specific competition concerns for grain purchasing in Eastern Canada and in most of Western Canada, for port terminal operations, for meal sales, and for sales of the vast majority of downstream refined and specialty oil products.”

“This new report from the University of Saskatchewan does not change any of these facts,” said the Bunge spokesperson. “We look forward to our continued work with Transport Canada and the Bureau to provide further information addressing these points.”

Transport Minister Pablo Rodriguez and his department have until June 2 to complete their public interest review of the deal.

As of last week, both Bunge and Viterra said they still expected the deal would close by mid-2024.

Editor’s note: This article was updated with added comments from a Bunge spokesperson.

Related:

Competition Bureau finds “substantial competition concerns” with Bunge’s proposed acquisition of Viterra

Survey says: Farmers reject the Viterra-Bunge merger

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