The proposed merger of agricultural giants Viterra and Bunge is raising concerns about competition from the federal government.
A recent report from Canada’s Competition Bureau concluded that Bunge Ltd’s $8.2 billion acquisition of Viterra “will likely have substantial anti-competitive effects and a significant loss of rivalry” in several grain and canola oil markets across the country. Canada.
The office highlighted Bunge’s ability to “materially influence the economic behavior” of G3 Global Holdings, a major Viterra competitor.
“As a minority shareholder of G3, Bunge has access to G3’s confidential and competitively sensitive information,” the report reads. “Provide[ing] a channel through which G3’s biggest competitor [Viterra] “has the ability to access information about the economic and competitive strategies of the G3.”
As a result of the proposed merger, the Bureau expects a substantial decrease in competition for canola procurement between Bunge and Viterra in certain Western Canadian markets. The report highlighted the Nipawin and Altona areas where the companies’ market share exceeded 45 per cent and 60 per cent respectively.
“The proposed transaction will result in the combination of the company with the largest number of oilseed crushing facilities and the company with the largest number of primary grain elevators in Western Canada,” the report reads.
Both G3 and Viterra own a combined 42 per cent share of the elevator capacity in Western Canada.
Additionally, the bureau predicts anticompetitive effects on the sale of canola oil in eastern Canada to customers who cannot receive oil by rail.
In his analysis, the Competition Commissioner highlighted that the exercise of market power by the merged Viterra-Bunge could not be limited by competitors. The merger would also pose challenges for other companies wanting to enter the market.
“Potential entrants face challenges including limited availability of suitable elevator sites, access to transportation networks to move grain, and high capital costs,” the report reads.
The office’s assessment included analysis of millions of records, interviews with more than 70 stakeholders, and two independent experts specializing in empirical economics and corporate governance.
Bunge’s acquisition of Viterra was first proposed to the Ministry of Transport in August 2023.
In September, the ministry decided that the proposed merger raised issues of public interest related to national transport. It ordered Transport Canada to begin a public interest assessment.
The assessment must be completed and delivered to the Minister of Transport by June 2, 2024.
In the 2022-2023 agricultural season, producers grew more than 90 million tons of cereals throughout the country.
worried APAS
The Agricultural Producers Association of Saskatchewan (APAS) said the office’s report validated the organization’s long-standing concerns.
“This merger will make it difficult for cereal producers to succeed,” APAS president Ian Boxall said in a news release on Tuesday.
“If we look at it in a nutshell, it looks like farmers will be the ones subsidizing these huge grain companies if this merger is approved. With less competition, cereal companies have more cards in their hands: more one-sided, take-it-or-leave-it cereal contracts, fewer delivery options, lower prices, and less supply chain transparency and data.”
In its message, APAS urged regulators and the federal government to consider the lasting impact of the proposed merger.
“Our priority remains the well-being and profitability of Saskatchewan and Canadian farmers,” Boxall added. “We seek assurances that their interests will be safeguarded in the face of this proposed monumental industrial change.”
Bunge Ltd. is a global agribusiness and food company headquartered in St. Louis, Missouri. Originally incorporated in Switzerland, the company has 23,000 employees and a significant presence throughout North America.
Viterra is an international agribusiness that was formed in 2007 when the iconic Saskatchewan Wheat Pool merged with Agricore United. It handles and markets grain, along with other agricultural products, and is based in Regina.