Business | Spring 2010
When bigger is better.
By Joy Gregory
What does the world’s largest lentil and pea splitting company have in common with the Grain Farmers of Ontario (GFO)? Both are determined to be relevant enterprises in their respective industries — and that means finding new ways to do business in highly-competitive markets.
Murad Al-Katib, president and CEO of Alliance Grain Traders Inc. (AGT), has taken some flak for his company’s aggressive approach to consolidation in the Western Canadian pulse industry. In December 2009 alone, the Regina-based company bought two more pulse processors, bringing its total to 20 — all located in the best pulse-producing regions of Canada, the U.S., Turkey and Australia.
It’s a giant leap from where the company began seven years ago and Al-Katib takes credit for helping Canadian growers capitalize on pulse markets that are "90 per cent concentrated in the developing world."
In Canada alone, AGT employs 250 people and staffs a dozen plants. But there is no monopoly, insists Al-Katib, who says AGT merely gives prairie growers another option in a very competitive market. And AGT won’t mess with that. Farmers grow pulse crops because there’s a market for them and companies like AGT will work hard to keep those markets and develop new ones precisely because they want to stay in business, says Al-Katib.
With producers now jumping in, consolidation isn’t merely a fact of life on the processing and marketing side of the ag-industry equation. Four years of strategic and political reorganization brought Ontario corn, soybean and wheat growers together to create Grain Farmers of Ontario (GFO) on January 1, 2010. This new organization, representing the three largest field crops grown in that province, embodies Ontario’s wheat marketing board and will collect and administer corn, soybean and wheat check offs. Representing 28,000 growers with five million acres of land, the corn, soy and wheat sectors generate more than $2.5 billion in Ontario farm-gate receipts, $9 billion in economic output and represent over 40,000 jobs.
"Roughly two-thirds of the producers were growing all three crops and a lot of the issues we were dealing with — government relations, market development and even research—affected us all," says Dale Mountjoy, past (and last) president of the Ontario Corn Producers’ Association.
Farming 1,400 acres of corn, soybeans and wheat near Oshawa, ON, Mountjoy was an early supporter of amalgamation. He doesn’t see GFO as a reaction to industry-wide consolidation so much as a natural step forward. The same economies of scale that prompted corporate mergers and takeovers also apply to GFO which, under a single board of directors, will collect check offs for the three crops, explains Mountjoy.
Al-Katib agrees that bigger can be better. From where he sits, corporate, organizational and even farm-based consolidation or acquisition aren’t about market domination. They’re about increased control of a specific enterprise’s profitability. In the end, those profits are good for every part of the value chain, from producers to buyers. Size matters, says Al-Katib, "because we act locally but operate globally."
