opinion
Editorial by Ian Boxall, President of the Saskatchewan Agricultural Producers Association
As Bunge CEO Gregory Heckman said in a recent editorial: defended the Bunge-Viterra merger proposal, argued that this consolidation would mean investment and growth in Canadian agriculture, particularly in Saskatchewan. While we expect an optimistic outlook from a corporate standpoint given the company’s efforts to maximize returns for shareholders, why do we think this merger might not be in the best interest of farmers? There are many.
First, the promise of a “commitment to Canadian workers” and guarantees against the closure of existing facilities do not directly address farmers’ core concerns of market concentration and competitive prices for their produce. A fundamental aspect of a healthy commodity market is the ability of producers to obtain a fair price for their crops. The fear is that super-large companies will stifle market competitiveness, reducing farmers’ options and lowering prices.
Heckman says G3 and Viterra will remain competitors after the merger, but this proposal underestimates the dynamics of the agriculture industry. When two giant companies merge, the resulting company naturally has influence over the market and can influence pricing and terms. Being competitors in name only does not guarantee a level playing field. The Canadian Competition Bureau also believes that the G3 and the new group have an incentive to reduce competition.
The dismissal of University of Saskatchewan report is based on ‘assumptions and incomplete data’ Close scrutiny is also required. Economic modeling often requires assumptions. However, this does not invalidate such research. Rather, it will dig deeper into the potential market impact. And as a multibillion-dollar company, Bunge must have the ability to replicate the research, draw its own conclusions, and add further to this important debate.
In fact, Heckman’s statements appear to support the hypothesis laid out in the University of Saskatchewan report. He said there will be no operational changes following the merger, suggesting that the pursuit of operational cost efficiencies will not be on the newly formed organization’s agenda. This argument puts farmers at a disadvantage and reinforces the perception that higher margins are expected to result in higher profits.
Additionally, Heckman’s argument suggests that Saskatchewan’s past GDP growth is related to past mergers in the grain processing sector. However, correlation does not imply causation. Rather, increases in GDP and farm income are likely to be the result of other factors, such as commodity prices and technological advances. Interestingly, Mr. Heckman does not mention the decline in his GDP for agriculture in the years following these mergers.
Heckman has also failed to address concerns raised regarding canola crushing and grain export capacity restrictions. The merger could put more than 40 percent of Vancouver’s export capacity and a significant portion of its canola crushing capacity under one company’s jurisdiction. This is an overwhelming share that could negatively impact farm income, with University of South Carolina researchers estimating losses of nearly $800 million per year. It is also important to note that Bunge has yet to publicly commit to building the Regina crushing facility previously announced by Viterra.
Finally, increased corporate consolidation often benefits shareholders at the expense of customers. Farmers and Canadians can feel the impact of reduced competition by looking at other industries such as telephone companies, banks, airlines, railways and grocery stores. In agriculture, if a supply chain is disrupted, a single large company may prioritize its own profits, leaving producers with less recourse. The resilience promised by Bunge to these disruptions requires more detailed explanation and evaluation, supported by evidence.
In conclusion, the possibility of reduced competitionThis, combined with market dynamics that usually favor large companies, can stack up against the very people responsible for the grain that ends up on our plates. If this agreement moves forward, it is imperative that we look beyond the surface of corporate promises to ensure that it includes safeguards that protect the interests and livelihoods of Canadian farmers.
