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NOVEMBER 15, 2012 | WWW.PRODUCER.COM | THE WESTERN PRODUCER
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GRAIN HANDLING | INDUSTRY CONSOLIDATION
Farmer-owned terminals a target? Grain company interest | The end of single-desk marketing has increased interest in prairie grain handling assets BY BRIAN CROSS SASKATOON NEWSROOM
In a year of mega mergers and grain industry consolidation, it remains to be seen whether Western Canada’s independent farmerowned grain terminals will emerge as the next takeover targets. Wayne Hittel, chair of the Inland Terminals Association of Canada, said Canada’s new deregulated wheat market has prompted farmerowned terminals to forge closer ties with big grain handling companies. But it’s not yet clear whether multinationals or Canadian-based line companies will attempt to secure a larger equity stake in Western Canada’s community-owned facilities. According to Hittel, corporate partnerships involving farmer-owned terminals can take many forms. In some cases, line companies have an equity position in farmer-owned facilities. In other cases, large companies like Viterra or Richardson will negotiate grain handling agreements with farmer-owned facilities. “Just because you’re not partnered with one of the bigger companies doesn’t mean that you don’t have some kind of alliance with them,” Hittel said. “Even if it’s not a joint venture, a lot of the time you’ll sign an agreement for delivering grain to their port terminal …. I’m going to say that probably all (independent terminals) have some type of agreement in place.” Like Little Red Riding Hood, farmer-owned terminals are relatively small players in a big environment. They are carrying a basket filled
Grain companies are forming alliances with independent terminals to increase grain flowing to their port facilities. | FILE PHOTO with goodies that every grain company wants — modern elevators, access to grain, and the trust and support of local growers. So far, there has been little to suggest that independent terminals are in the crosshairs of large Canadian companies or multinationals. But industry observers are watching. Last year, farmer shareholders at North East Terminal near Wadena, Sask., voted in favour of selling their terminal and other NET assets to Richardson International for roughly $25 million.
That sale arose after NET received an unsolicited offer in June 2010. After reviewing the offer, NET board members sought competing bids, eventually securing a deal that was reported to have paid NET shareholders $700 to $750 per share on an original investment of $100. Cargill, which had a 22 percent ownership stake in the company, said it would abide by the wishes of local shareholders. At least three of ITAC’s 10 member terminals have joint ventures with large grain handling companies.
Viterra has an equity position in CMI at Naicam, Sask., and Gardiner Dam Terminal at Strongfield, Sask. Cargill has an stake in the South West Terminal near Gull Lake, Sask. Shawn Graham, Gardiner Dam Terminal Joint Venture general manager, said Glencore International’s proposed takeover of Viterra would make Glencore the terminal’s fifth corporate partner in 11 years. “We’re getting good at building partnerships, or trying anyways…,” Graham said. At Unity, Sask., North West Terminal is taking a different tack. Shareholders there bought out their corporate partner Richardson in 2007 and are in the final stages of paying for that equity investment. Jason Skinner, chief executive officer, said NWT will soon be a completely independent, shareholdercontrolled company that owns country facilities, as well as a share in a West Coast export terminal. “It’s always interesting to be standing on the outside watching, that’s for sure,” said Skinner when asked about consolidation in the grain industry. Skinner said interest in prairie elevators has increased since the elimination of single-desk marketing. “I think a lot of those companies are interested in this market and what opportunities it presents.” Kevin Hursh, executive director of ITAC, said he is not aware of pending takeover deals involving ITAC terminals, but talks have likely taken place. “As an association, we don’t really get involved in (those discussions) because that’s the business of individual members but I don’t think it’s much of a secret that there’s been lots of talk back and forth and lots of deals looking to be done,” Hursh said. ITAC terminals handle about 2.5 million tonnes of grain, pulses and oilseeds a year and had assets with an replacement value of about $370 million in 2011. Hursh said the market value of those assets has jumped over the past few years.
LENTILS | MARKET OUTLOOK
Pulse marketer’s predictions for rebound pushed to 2013 BY SEAN PRATT SASKATOON NEWSROOM
Alliance Grain Traders keeps predicting a lentil market recovery is imminent, but it still hasn’t materialized. Company president Murad AlKatib reported more disappointing result for the third quarter of 2012. Demand for AGT’s products is strengthening, but it’s not showing up in the bottom line. “Pricing pressure and generally lower prices on pulses in end use
markets has not led to the margin recovery to the extent that we believed we would see in the period,” he told investment analysts and reporters in a conference call. The Regina firm posted sales of $210 million for the quarter, up from $202 million in the previous quarter and $190 million in last year’s third quarter. Earnings before interest, taxes, depreciation and amortization were $11.5 million, up from $9.3 million the previous quarter but down from $15 million posted a year ago.
“In the more than 15 years I’ve spent in the global export sector, believe me when I say we have never seen conditions like those that we are now emerging from. These conditions are about as bad as they can get,” said Al-Katib. Last quarter, Al-Katib expected a return to normalized sales and margins in the second half of 2012. His new prediction for recovery is 2013. “Credit liquidity constraints globally appear to be easing and we are seeing stabilization of currency in
many of our key markets,” he said. The company anticipates that will eventually result in a return to normalized sales and margins. In the meantime, Alliance has adopted a strategic plan that includes a continued focus on cost cutting and expanding the scope of its business. AGT h o p e s t o b o o s t ma r g i n s through value adding. Alliance will examine opportunities to process cereals, soybeans and other oilseeds at its Canadian pulse processing plants to increase use of those facilities.
Worries about the impending U.S. fiscal cliff pressured markets lower after U.S. president Barack Obama was returned to office. For the week, the TSX was down 2.4 percent, the Dow fell 2.1 percent, while the S&P 500 lost 2.4 percent and the Nasdaq dropped 2.6 percent. Cdn. exchanges in $Cdn. U.S. exchanges in $U.S.
GRAIN TRADERS NAME
EXCH
ADM Alliance Grain Bunge Ltd. ConAgra Foods Legumex Walker Viterra Inc. W.I.T.
NY TSX NY NY TSX TSX OTC
CLOSE LAST WK 25.39 13.30 71.49 27.77 6.88 15.77 13.25
26.85 14.03 71.98 28.07 7.12 15.74 13.25
PRAIRIE PORTFOLIO NAME
EXCH
Assiniboia FLP OTC Ceapro Inc. TSXV Cervus Equip. TSX Ridley Canada TSX Rocky Mtn D’ship TSX
CLOSE LAST WK 50.55 0.06 19.89 9.25 11.20
50.55 0.06 20.77 9.55 10.85
FOOD PROCESSORS NAME
EXCH
BioExx Hormel Foods Maple Leaf Premium Brands Smithfield Sun-Rype Tyson Foods
TSX NY TSX TSX NY TSX NY
CLOSE LAST WK 0.09 29.61 11.00 18.00 20.76 5.71 16.81
0.09 29.75 11.07 18.25 21.18 5.93 17.13
FARM EQUIPMENT MFG. NAME
EXCH
AGCO Corp. NY Buhler Ind. TSX Caterpillar Inc. NY CNH Global NY Deere and Co. NY Vicwest Fund TSX
CLOSE LAST WK 44.32 5.45 84.95 44.10 84.29 11.86
45.78 5.41 85.79 44.95 85.60 12.05
FARM INPUT SUPPLIERS NAME
EXCH
Agrium TSX BASF OTC Bayer Ag OTC Dow Chemical NY Dupont NY BioSyent Inc. TSXV Monsanto NY Mosaic NY PotashCorp TSX Syngenta ADR
CLOSE LAST WK 96.07 79.95 83.28 29.36 43.34 0.96 86.43 51.57 39.04 75.68
105.44 83.21 85.91 29.75 44.15 1.02 85.87 52.19 40.11 76.75
TRANSPORTATION NAME
EXCH
CN Rail CPR
TSX TSX
CLOSE LAST WK 86.38 90.10
87.04 93.71
Toronto Stock Exchange is TSX. Canadian Venture Exchange is TSX Venture or TSXV. NAS: Nasdaq Stock Exchange. NY: New York Stock Exchange. ADR: New York/American Depository Receipt. OTC: Over the counter. List courtesy of Ian Morrison, investment advisor with CIBC Wood Gundy in Calgary, a division of CIBC World Markets Inc. Member of CIPF and IIROC. Listed stock prices come from Thompson Reuters and OTC prices from Union Securities Ltd. Sources are believed to be reliable, but accuracy cannot be guaranteed. Morrison can be reached at 800-332-1407.
Peas go to the dogs SASKATOON NEWSROOM
Alliance Grain Traders’ new $22 million fractionation plant in Minot, North Dakota, should be converting pulses into proteins, fibres, starches and flours early next year. A big market for those products will be the pet food industry. AGT president Murad Al-Katib said American dogs eat five million tonnes of meat a year. Half of Canada’s pea crop would be needed to capture 10 percent of that protein market.