Bunge-Viterra deal highlights need for new approach to merger reviews
Will Canada approve, deny or put conditions on Bunge’s proposed take-over of Viterra? We don’t know yet, but on August 1, 2024 the European Commission (EC) approved Bunge’s acquisition of Viterra, on the condition it sells Viterra’s oilseed businesses in Hungary and Poland along with a some logistical assets linked to these operations. After a mere 35 business days examining the deal’s potential impacts, EC stated, “These commitments fully address the competition concerns identified by the Commission, by removing the horizontal overlaps and vertical links between the parties’ oilseed businesses in the concerned territories.” Clearly, the EC’s response was incomplete and its decision should not influence Canada.
If the acquisition is allowed, Bunge will become the world’s largest agricultural commodity trader. Selling off a few businesses in Eastern Europe will not stop it from using its massive footprint to influence markets, prices and production to advance its own interests at the expense of farmers, consumers, and workers, no matter what country it operates in.
Bunge is already the world’s largest oilseed and protein meal processor, globally dominant in soybeans, canola, sunflower seed, corn and wheat. It operates in 40 countries with over $USD 57 billion annual revenues. Viterra is Canada’s largest grain company, and the world’s eighth-largest grain trader, operating in 38 countries on six continents, with revenues of $USD 53 billion in 2023. Both companies are vertically integrated, and own large networks of country elevators, inland and port terminals, processing and milling facilities for wheat and oilseeds, as well as significant data and logistics systems.
Viterra’s roots are in the prairie co-operatives that built Canada’s grain handling system over the course of nearly a century. After experiencing exploitation by the private grain trade in the form of low prices, grading fraud, short weights, and outright intimidation by agents, Canadian farmers carried out a remarkable feat of organization to develop a co-operative elevator system to gain control of the trade. The prairie grain cooperatives operated as profitable farmer-run businesses that handled nearly 60% of Canada’s grain from country elevator to port terminal — until the changes stemming from NAFTA led to restructuring that ultimately and controversially converted these farmer-created co-operatives into the corporation that rebranded as Viterra in 2007.
While farmers controlled most domestic grain handling, they were still vulnerable to international traders. To counter this, the Canadian Wheat Board (CWB) was established in 1935 as the single desk selling authority, governed by an elected board of farmers that sold all prairie wheat and barley exports, and returned full proceeds to farmers every year. After the Harper government stripped the CWB of its authority, it gave the CWB’s assets to a partnership of Bunge and Saudi Arabia’s SALIC, which is now doing business as G3.
If Bunge is allowed to buy Viterra, it will get billions of dollars of worth revenue potential created by and for Canadian farmers to counter the very exploitation private grain traders like Bunge visited on them a century ago.
Viterra and Bunge not only benefit from the capital and relationships prairie farmers built over many decades, but as multinationals they can make decisions that affect conditions of life around the world regarding food, land, transportation, distribution of wealth, and increasingly, energy (biofuels) as well. If Bunge acquires Viterra, it will have even greater power to shape the sector and set the conditions for doing business, for farmers, other commodity trading and logistics businesses, the food processing industry, and the wholesale and retail sectors that make up the global agri-food value chain. Farmers will face lower crop prices and fewer choices, as shown by Canadian economists economists Richard Gray, James Nolan and Peter Slade in The Economic Impact of the Proposed Bunge-Viterra (BV) Merger on the Grain Sector in Western Canada: A Preliminary Assessment. Workers and consumers see wages drop and food prices rise because such dominant corporations can use their power to make excess profits.
In their July 2024 report, A new merger wave in the agri-food value chain? Some reflections on the Bunge/Viterra merger, European economists Ioannis Lianos, Stavros Makris, Jean-Benoit Maasin, sketch out the complexities competition authorities should take into account. They note that Archer Daniels Midland (ADM), Bunge, Cargill, COFCO and Louis Dreyfus comprise a tight oligopoly that controls international grain trade; Bunge acquiring Viterra would further concentrate this power. The Big Five are able to influence futures markets, spot markets and speculation on food prices to obtain excess profits which in turn drive food price inflation and have an impact on food insecurity and consequently, political stability. The ability to learn from their vast information network (including shared big data platforms) allows these giants to strategically shape the architecture of the sector. Their degree of control also affects the direction and type of innovations in the food system. Mergers like Bunge’s acquisition of Viterra, along with many smaller acquisitions that get little attention, reduce the diversity of food system businesses. As control tightens and centralizes in fewer hands, the system as a whole becomes less resilient, increasing the breadth and magnitude of harm from the inevitable disruptions due to climate impacts, pandemics, and wars.
Clearly, a merger of this magnitude is no longer a national or even regional matter.
Governments need to recognize that their competition bureaus, or anti-trust authorities, are not dealing with a theoretical landscape where many small firms compete on a level playing field. Today, a few global firms dominate in nearly every sector of the economy, world-wide. If governments fail to recognize the conflict between corporate power serving private interests and democratic governance in the public interest, they end up serving an ideology that says commercial transactions are sufficient to decide what matters in a society, entitling those with the most economic power to have the most political power.
Who has power within the food system is a critical matter for public policy. Canada has a duty to use the power of government to build a more just and robust food system. Canada must say no to a Bunge-Viterra merger.
