Canada Raises Red Flags on Bunge-Viterra Merger
Canadian competition authorities are concerned that St. Louis-based Bunge’s proposed acquisition of competitor Viterra could hurt Canadian farmers and shut out rival grain processors, according to a new report by the nation’s Competition Bureau.
The $8.2 billion deal proposed last summer would create a new global grain trading goliath to rival Archer-Daniels-Midland, the second-largest commodity trader in the world. Consolidated commodity traders are already under fire for raking in record profits during a global food crisis and abusing their market power to exacerbate market volatility and price hikes. This merger would only make these dynamics worse. It will also affect regional markets for grain and oilseed processing around the world, particularly in Canada.
Canada’s transportation department, not the Competition Bureau, will decide to approve or block this merger next month. The agency has a history of permitting mergers with conditions, such as sell-offs. “They don’t have a reputation for intervening decisively in these things,” says Keldon Bester, the executive director of the Canadian Anti-Monopoly Project.
At one time, Viterra was the largest grain handler in Canada. The company was born out of several mega-mergers between Canada and Australia’s formerly government-run grain co-ops. Glencore then acquired Viterra in 2012 and started to run all its agriculture trading under the Viterra brand.
Today, Viterra operates 320 facilities in 37 countries, but it maintains a dominant presence in Canada. An investigation by the Canadian Competition Bureau found that Viterra owns nearly 20% of the general grain elevators in western Canada, more than any other company. Three-quarters of Canada’s crops come from this region.
Farmers typically sell their crops to either a general grain elevator or directly to a processor. Viterra and Bunge both operate grain storage and processing facilities, though Bunge is more dominant in processing. Together, Bunge and Viterra own seven of the 14 oilseed crushing facilities in Canada. Combining these companies would shrink the number of buyers for critical Canadian crops, particularly canola.
Canada exports more canola than any other country and roughly 20% of the grain grown in the country is canola. This merger would concentrate 40% of Canada’s canola crushing capacity in one firm. “Canola crushers are considered to be particularly significant competitors in setting canola prices,” the Competition Bureau says.
Lost competition between Bunge and Viterra would particularly harm canola farmers in parts of Manitoba and Saskatchewan. “The merger would likely result in decreases in prices paid to farmers by facilities buying canola in the areas of Nipawin and Altona,” the report finds, lowering farm revenues by $15 to $19 million, annually.
“This merger is not in the best interest of producers,” the president of the Agricultural Producers Association of Saskatchewan, Ian Boxall, told the Saskatoon StarPhoenix. “Within 30 minutes of my farm, four outfits would be under one house.”
The merger would also increase Bunge’s hold on canola oil sales in eastern Canada, particularly for customers that can’t receive oil by rail. As it stands, Bunge and Viterra are only two of three canola oil suppliers in eastern Canada and a merger would give Bunge 70% of this local market.
By controlling the first step in the canola refining process, Bunge could entrench its dominance over further refined canola products. “Bunge may be unwilling to supply refined oilseed oils on competitive terms to customers of refined oil products that Bunge perceives to be competitors,” the Bureau says.
Given the high barriers to building new grain elevators, the Bureau didn’t think that new entrants or existing competitors could prevent a combined Viterra and Bunge from abusing their market power. Especially because Bunge owns a 25% stake in one of the fastest growing grain competitors in Canada, G3. Given Bunge’s ownership stake and access to sensitive information, the Bureau determined that Bunge has a “material influence” over G3’s competitive strategy and operations.
Bunge and Viterra released a joint statement saying that the report identifies only “localized concerns” that the companies believe are “misplaced.”
The Competition Bureau’s report was sent to Canada’s transport department, which has the final say on the deal because grain elevators are so closely related to rail and port infrastructure. The Transportation Minister must decide by June 2.
It’s hard to predict how Transport Canada will rule, but based on past practice, Bester expects a divestiture deal. However, the Canadian Anti-Monopoly Project encouraged the Transportation Minister to block the deal, in a statement.
Bunge and Viterra also need to get antitrust approval for their merger in other “major jurisdictions,” including Brazil, the U.S., and the European Union.
National antitrust enforcers’ focus on local harms could overlook the bigger picture risks of further consolidating global supply chains. Disruptions from the COVID-19 pandemic and war in Ukraine sparked a global food crisis that increased the absolute number of hungry people by 40 million between 2021 and 2022. Over this same period, net profits for Bunge and Viterra’s largest competitors tripled compared to previous years (Viterra enjoyed its most successful year on record, though Bunge’s net profits did not increase as dramatically).
A report by the Dutch corporate accountability organization, SOMO, found that high degrees of consolidation and vertical integration in grain trading allow a few companies to influence global food availability and profiteer off supply chain disruptions. A merger between Viterra and Bunge “will further strengthen the [top grain traders’] dominant market position,” SOMO wrote.
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