Farm & Food File: Merger of grain giants betrays prairie origins

As American grocery buyers await a Federal Trade Commission verdict on Kroger’s two-year-old, $24.6 billion bid to buy competitor Albertsons, the European Commission took just 35 days to give its blessing to the merger between two of the world’s largest grain merchandisers, Bunge and Viterra.

The megadeal, valued at about $34 billion at the time of its June 2023 announcement, isn’t a slam dunk, though.

Canada, where both companies own substantial export facilities in Vancouver, is holding up approval as it evaluates the deal’s impact on western Canada’s grain markets. And for good reason.

Bunge, the world’s fifth-largest grain merchant, operates in 40 countries and has about $57 billion in annual revenues.

It’s the “world’s largest oilseed processor” and is “globally dominant in soybeans, canola and corn,” notes a recent 92-page report on the deal by SOMO, an Amsterdam-based, independent agency that examines corporate power in business, politics and culture.

Viterra is no slouch, either. Owned by mining giant Glencore, it has extensive grain processing and export facilities in 38 countries and, in 2023, had revenues of $53 billion.

Together, however, the pair would challenge industry cornerstones. “The proposed transaction … will create a global grain giant to rival Cargill and Archer Daniels Midland, further contributing to the consolidation of the crucial commodity trading and logistics segment of the global food value chain,” explains SOMO.

That type of latent market power, notes Canada’s National Farmers Union, belies Viterra’s deep roots in the nation’s “prairie cooperatives that built Canada’s grain-handling system over the course of nearly a century.”

Those co-ops — founded, funded and fueled by “remarkable” farmer members — developed an “elevator system to gain control of the (local grain) trade” and “operated as profitable farmer-run businesses that handled nearly 60% of Canada’s grain from country elevator to port terminal.”

When the North American Free Trade Agreement went into effect in the mid-1990s, however, the prairie co-ops and the nation’s single-desk export agent, the Canadian Wheat Board, lost political favor with the newly-installed Conservative Harper government.

Shortly thereafter, explains the NFU, the “Harper government stripped the CWB of its authority” which quickly “led to restructuring that ultimately and controversially converted these farmer-created co-operatives into the corporation that rebranded as Viterra in 2007.”

But now, “if Bunge is allowed to buy Viterra, it will get billions of dollars worth of revenue potential created by and for Canadian farmers to counter the very exploitation of private grain traders like Bunge visited on them a century ago,” warned NFU in a Sept. 3 press release.

It’s not idle speculation. A March 2024 “preliminary” report on the Bunge-Viterra deal by three University of Saskatchewan ag economists showed that “by any measure, the grain industry in Canada is already very concentrated and will only become more concentrated with a BV merger.”

The trio then tested their hypothesis. A “merger simulation indicates that Vancouver export basis will increase by about 15% … while canola crush margins will increase by 10%.”

When added together, the total impact of the proposed Bunge-Viterra deal “reduces grain producer income by approximately $770 million per year.”

And outside of Canada, says SOMO, the merger is equally troubling. “It will significantly contribute to the consolidation of the global agribusiness sector by creating the world’s largest grain trader (that can) undermine the resilience of food supply chains, economic democracy and food security and sovereignty.”

It’s a story almost as old as agriculture itself: Companies accumulate market power to squeeze otherwise unobtainable revenue from their market’s least protected, most vulnerable players.

And who’s less protected and more vulnerable to predatory global grain giants than farmers?