Just four companies known as the ABCD group control 90 percent of the world grain trade, and the B in this group is about to get much bigger.
B is for Bunge, which has announced it is buying Viterra. The other ABCD companies are Archer Daniels Midland, Cargill and Louis Dreyfus.
Viterra, a subsidiary of the Swiss conglomerate Glencore, is 40 percent owned by the Canada Pension Fund Investment Board, and has its headquarters in Regina. Bunge’s acquisition of Viterra would leap-frog it into first place in Canada, and move it into third place after Cargill and China’s COFCO on the world stage.
Viterra and G3, which is already co-owned by Bunge, are dominant in wheat, while Bunge is dominant in canola, soybeans and corn. Combining them gives one company massive market power over the largest crops grown in and exported by Canada.
Until 1997, farmers owned close to 60 percent of Canada’s grain handling system through their co-operatives, and until 2012, controlled all exports of prairie wheat and barley through the farmer-directed Canadian Wheat Board. With farmers in charge, the profits from sales were returned to our rural communities and were engines of rural prosperity.
The National Farmers Union has called for change to ensure the Competition Bureau prevented harmful mergers, including outlawing mergers that result in any company having more that 20 percent of market share in any sector.
The CR-4 ratio — four-firm concentration ratio — refers to the market share of the four largest firms in a market. If the CR-4 is less than 40 percent, a market sector is considered to be competitive. If CR-4 is above that, anti-competitive behaviour can be expected. Efficiency gains from economies of scale are not shared with customers, but captured as profits and used to further accelerate consolidation. If the Bunge-Viterra merger goes ahead, we are looking at a CR-4 ratio above 80 percent in Canada’s grain-handling sector.
Today, farmers produce larger quantities and more higher value products than ever, but most of the wealth created is 小蓝视频 captured by the ABCD traders.
Past mergers reviewed by the Competition Bureau have shifted assets between already powerful players. The growing gap between the value farmers create and the value we receive from the marketplace amounts to billions of dollars every year.
In light of the Competition Bureau’s failure to prevent rapid consolidation of market power in the Canadian grain and oilseed sector, the NFU encourages the federal government to make a counteroffer to buy Viterra and return its assets to the control of Canadian farmers and workers through a new co-operative. This would be in the national interest, ensuring food security and maintaining the proceeds from grain and oilseed exports within the Canadian economy.
In 2018, the Government of Canada bought the yet-to-be-built Trans Mountain Pipeline for $4.5 billion, and has invested about $21.5 billion in construction since.
Unlike the pipeline, the Viterra network exists, and is operating. For a purchase price of just $US8.2 billion (C$10.9 billion) — a net annual cost of C$3.94 per acre of Canadian farmland over 30 years — Canada would own the world’s eighth-largest grain trading company.
Instead of waiting for the Competition Bureau to hive off pieces of Viterra, G3 and Bunge to the other big players in the grain industry, the federal government could create true competition in the sector by ensuring the farmers who produce the commodities will own and control the assets they have created, and regain the market power needed to safeguard farmers’ interests in the international marketplace.
Cathy Holtslander is the National Farmers Union’s director of research and policy.
