Proposed Bunge-Viterra merger will cause significant economic harm to producers

The Agricultural Producers Association of Saskatchewan (APAS), Alberta Grains, SaskBarley and Sask Wheat are raising serious concerns about the proposed merger between Bunge and Viterra and the resulting economic losses for producers.

A recent study on the potential effects of the proposed merger on the grain sector in Western Canada by Dr. Richard Gray, Dr. James Nolan, and Dr. Peter Slade, from the University of Saskatchewan (U of S), with research support from APAS, Alberta Grains, SaskBarley and Sask Wheat, found the merger is likely to cause substantial economic harm to grain producers. The full report is available here.

The results support the findings of the Competition Bureau’s review that the merger is likely to result in substantial anti-competitive effects and harm competition in markets for grain purchasing.

“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” said Jake Leguee, Sask Wheat Chair.

The U of S report examined the impact of the proposed merger on grain export services at the port of Vancouver, BC, the canola crushing sector, and competition at primary elevators, and found worrisome levels of market concentration in all three scenarios.

The merger would result in over 40 per cent of the export capacity at Vancouver controlled by one firm, which would increase the export basis by 15 per cent. For the canola crushing sector, concentration of market shares would increase canola crush margins by 10 per cent. The merger may also reduce incentives for Viterra to build its proposed canola crushing facility in Regina, SK. The increase in export basis and canola crush margins would reduce producer income by approximately $770 million per year.

The analysis of primary elevator competition revealed concerns over market power in many areas in Western Canada, which will only get worse if the industry continues to consolidate.

“The proposed merger brings to the forefront concerns about market concentration and its potential ripple effects on grain producers” said 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.”

The groups strongly urge the Federal Government to consider the impact of the proposed merger on the profitability and sustainability of farmers. Given the lack of existing competition within the grain sector, further consolidation will lead to substantial economic losses for both farmers and the Canadian economy.