Farmers Would Lose Hundreds Of Millions Of Dollars If Bunge – Viterra Merger Gets Green Light
SASKATOON, SK—On June 13, 2023 Bunge announced plans to buy Viterra, Canada’s largest grain company. Bunge is the world’s fifth-largest grain company. The Competition Bureau has found the merger would significantly harm competition. The Minister of Transport has also examined the deal’s potential impacts and will be submitting his recommendation to Cabinet in early June.
The National Farmers Union believes it is not possible to mitigate the negative impacts of this deal, and therefore urges Cabinet to deny permission for the merger.
Bunge is incorporated in Switzerland, with headquarters in St. Louis, Missouri. It operates in 40 countries, with annual revenues over $USD 57 billion. It is the world’s largest oilseed processor, globally dominant in soybeans, canola and corn. In 2015 Bunge partnered with Saudi Agricultural and Livestock Investment Company (SALIC) to form G3 in order to take over the assets of the Canadian Wheat Board after its single desk authority was dismantled. G3 thus holds invaluable CWB business records detailing its sales with over 70 countries during its 77-year history.
Viterra was formed in 2007 when the former prairie Wheat Pool co-operatives controversially restructured as a private corporation. The company is now owned by the Canada Pension Plan Investment Board, the British Columbia Investment Management Corporation which invests for BC public sector pension plans, and Glencore, a multinational focused on mining. In 2009 Viterra purchased the assets of the former Australian Barley Board, in 2022 it acquired Gavilon, a US-based grain trader. It now operates in 38 countries with revenues of $USD 53 billion in 2023. It is dominant in wheat.
The grain trade in Canada is already highly concentrated. The American multinational Cargill, Winnipeg-based Richardson, G3 and Viterra comprise nearly 70 percent of Canada’s prairie elevator capacity and 52 percent of total port terminal capacity. If Bunge is allowed to buy Viterra, the new company would be Canada’s largest by far. It is also likely to spur further acquisitions by fellow giants, Cargill and Richardson to scale up their own operations, leading to even greater corporate concentration in the grain trade.
Any merger that would result in market concentration of 35% or more within a sector triggers a review by Canada’s regulatory authorities. The Competition Bureau studied the proposed Bunge-Viterra merger and on April 23, 2024 reported that it “is likely to result in substantial anti-competitive effects and a significant loss of rivalry between Viterra and Bunge in agricultural markets in Canada.” Because the merger involves port facilities, the Minister of Transport must review potential impacts. The deadline for his recommendation to Cabinet is June 2. Cabinet then makes the final decision to either approve the merger, approve it with conditions, or deny it. Bunge expects to get regulatory approval and for the merger to be done by mid-2024.
Four prairie farm organizations – APAS, SaskWheat, SaskBarley and Alberta Grains commissioned agricultural economists Richard Gray, James Nolan and Peter Slade to do an in-depth study of the merger’s impacts on farmers. Their report The Economic Impact of the Proposed Bunge-Viterra (BV) Merger on the Grain Sector in Western Canada: A Preliminary Assessment concluded that it would reduce farmers’ incomes by $770 million per year. It would lead to a 15% increase in discounts from primary elevator grain prices, and farmers selling canola for crushing would also lose $200 to $325 million dollars annually, depending on whether the new company’s monopoly power was achieved by building the proposed Viterra crush plant (and thus owning 42% of Canada’s crushing capacity) or by not building it (causing a bottleneck). The new company plus G3 would control 47% of Vancouver port capacity. A merged Bunge-Viterra company would thus be able to capture hundreds of millions of dollars per year from farmers, and transfer that money to its own shareholders at the expense of Canada’s economy and the prosperity of prairie farmers and their communities.
The Competition Bureau has a very limited range of remedies it can recommend to reduce the negative impacts of mergers. The economists’ study analyzes these possible remedies and finds that even if these conditions were imposed by Cabinet, there would be considerable economic harm to farmers and the prairie economy.
As the NFU has said in its submission to the public consultation on Canada’s competition policy, a central challenge for decision-makers is to recognize the difference between competition and competitiveness, and to manage their dynamics in the public interest.
The word “competitive” is often used in contradictory ways: to describe a high degree of competition among buyers, or to refer to a company’s ability to win a competition due to its size and power. It is critical to recognize that the “competitiveness” of a market and the “competitiveness” of an individual firm represent different phenomena, and over time, the success of a few competitors can eliminate effective competition from their market.
As the economists’ study pointed out, the CR4 (measuring a sector’s concentration of market share among its four largest firms) for grain buyers is already over 80% for nearly three-quarters of the prairie land base; and if the merger goes ahead nearly half (45%) of the prairie land base will face a CR4 ratio of over 90%. Canadian grain farmers have very few choices of buyers, trucking to an alternative buyer is costly, and the ability to hold out for a better price is limited due to the need to pay their production costs.
There is a compelling case for stopping the merger based on how it would restructure Canada’s grain trade. The merger’s negative implications are even stronger when considering the new company’s potential to dominate markets internationally – which the Competition Bureau does not examine.
Bunge and Viterra operate in approximately 40 countries, and both have particularly large footprints in South America. Multinationals can source grain from different countries, own massive storage facilities, and have access to increasingly sophisticated production data and market intelligence. When Canadian farmers sell grain, they may at best be choosing between a handful of elevators in their region, but at the same time, they are competing against farmers in other countries – including farmers who are desperate to sell. The power imbalance between companies like Bunge and Viterra compared with individual farmers is already extreme. Allowing the two giants to merge will make it significantly worse.
Cabinet could approve the merger with conditions in order to reduce its negative impacts. However, selling off some of the elevators, one of the port facilities and/or its stake in G3 would have little impact on the ability of the newly merged entity to use its concentrated economic power to advance the company’s interests at the expense of Canadian farmers and Canada’s economy more broadly – and any buyers for these assets would also be among the world’s most powerful grain companies. We also recognize that a Bunge-Viterra merger would not be the end of the story: rather it would likely trigger a new round of consolidation by prompting strategic responses from other Canadian and multinational grain sector players.
With its expanded footprint of country elevators, processing facilities and port facilities, the merged corporation would be able to increase its profits at the expense of farmers and would be able to influence production decisions to align with the company’s interests, which could conflict with farmers’ autonomy and/or Canada’s national food security and economic interests. The hundreds of millions of dollars farmers would lose as a result of this deal every year is just the beginning. A Bunge-Viterra merger would significantly harm farmers, undermine Canada’s food sovereignty, and transfer billions of dollars out of the Canadian economy over time. For these reasons we call upon Cabinet to deny approval of this harmful merger.
TAKE ACTION: Contact your Member of Parliament and tell them “NO” to the Bunge-Viterra Merger
