Canada in the spotlight

by Arvin Donley
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If timing is indeed everything, then the Canadian Grains Council could not have picked a better year to launch its inaugural Canadian Global Crops Symposium.

In recent months the Canadian grain industry rejoiced over a record-shattering grain and oilseed harvest of nearly 75 million tonnes (a roughly 20-million-tonne increase over the previous year), only to be frustrated by logistical nightmares, including a historically harsh winter that limited the ability to transport the bumper crop to customers. The nearly 250 people who attended the sold-out symposium, held April 14-16 at the Fairmont Hotel in Winnipeg, Manitoba, were buzzing about these topics and eager to hear an impressive group of speakers offer their insights and potential solutions for addressing these issues.

The keynote speaker, Greg Page, executive chairman and former president and CEO of Cargill, said he believed the 75-million-tonne crop was going to become a fairly regular occurrence in the future and that all the players in the logistical chain, from farmers to railways to port terminals, will need to take the necessary steps to ensure that a crop of this size can be moved efficiently.

While the Canadian railway system has received the brunt of the criticism for this year’s crop not being moved as quickly as many would like, Page said every link in the supply chain will have to make improvements going forward.

“The key is to get the right mix of investment of on-farm storage and off-farm loading and handling facilities, transportation assets, and ultimately the infrastructure in ports to be able to move it quickly,” Page said. “If we overinvest in one link in the chain it means a lot of wasted assets and ultimately a more expensive grain marketing system in Canada. Getting the right balance in infrastructure between ports, rails and farms is extremely critical.”

Curt Vossen, president and CEO of Richardson International Limited, agreed with Page’s assessment. “I think we’re seeing new standards in what’s normal in terms of cropping capabilities in Western Canada,” said Vossen while participating on a Canadian Exporter Leader Panel. “I think it’s the new normal as opposed a 45 to 50-million-tonne crop. So how do we rise to this new challenge in which we have an opportunity bestowed on us to bring in another $10 billion of foreign exchange? We have to invest in new capacity and even redundant capacity. We have to get away from the rhetoric and hostility and work together to find solutions.”

Cargill Canada CEO Jeff Vassart said the system capacity needs to be built not just for steady growth in crop production but also to be able to handle dramatic upward swings such as that which occurred last fall.

“To only use a long-term trend to predict what the size of our production and what our crops will be going forward, I’m not sure that positions ourselves to be successful in the future,” he said.

‘A good place to do business’

Unlike the vast majority of countries, Canada exports more grain and oilseeds than it consumes domestically. Page noted that as much as 50 million of the 75 million tonnes harvested last fall is projected for export markets. Canada produces only 2.5% of the world’s grain but accounts for 13% of global trade, he noted.

The country’s “just in time” grain handling and transportation system, which includes far more on-farm storage (about 90% of total storage) than most countries, is complex and cannot succeed without collaboration from all the stakholders.

However, Page noted that “when that system works, it creates the most efficient logistics system in the world.” Page said despite this year’s logistical problems, Cargill views Canada as a great long-term investment.

He said the company, which employs 8,400 people at 100 locations throughout the country, has added about $1 billion in the last decade to its asset footprint in Canada and intends to continue to invest in grain handling, canola crush and refining and agricultural products production.

For example, Cargill is building a canola processing facility near Camrose, Alberta, scheduled to open later this year, that will have annual crushing capacity of 850,000 tonnes.

“Overall, Canada is a good place to do business and has been for a long time,” Page said. “A significant portion of Cargill’s future growth will have Canadian connections. There is a low political risk here, especially in comparison to the United States. Many of our global customers operate here, and it’s our opportunity to serve them. We are pleased with the move to a free market grain system in wheat and the federal government’s support for free trade.”

He also pointed to the country’s remarkably diverse set of crops – it produces significant amounts of wheat, barley, canola, corn, flax and soybeans – as well as its ability to produce grains and oilseeds with very little reliance on irrigation as reasons that Cargill has increased its footprint in Canada.

“The percentage of cultivated acres irrigated in Canada is low relative to almost any place on earth,” Page said. “It’s about 1.3 million acres, or less than 2%, while it’s nearly 8% in the U.S. Canada’s reputation as a rain-fed reliable supplier is becoming increasingly important.”

Finally, Page noted that Canadian farmers receive high rankings for embracing technology and reacting to the strong market signals they receive.

He predicted that Asia, and particularly China, would continue to be a significant export market for Canadians, which is why the continued development of the west coast ports is critical.

“Canada must continue to capitalize on its export pedigree,” he said. “It has a huge opportunity to help supply the burgeoning demand in Asia. The recent relaxation in China of some of its self-sufficiency standards should be of great encouragement to everybody in this room about the opportunities that lie ahead.”

All of Canada’s major grain companies have announced plans to expand port facilities on the west coast. Cargill is spending $45 million for an expansion at the Port of Vancouver and Richardson International and Viterra also have projects under way.

Rabobank’s perspective

Bill Cordingley, managing director, head of food and agribusiness and advisory, Rabobank International in the Americas, concurred that Canada’s is held in high esteem by its trading partners for its product quality, secure investment environment, and reliability despite its recent issues with transporting its bumper crop.

“Being a reliable, trustworthy trading partner is a critical element in this era in which the global commodity business is very volitale,” Cordingley said. “In this era when often a supplier or customer in the global market has little incentive not to walk away from a transaction if the market dictates that it’s in its financial interest to do so, having that reputation of consistency and reliability is critical.”

He said Canada has a relatively concentrated customer base, with five markets – China, Japan, the U.S., Mexico and Indonesia – taking in most of the country’s grain and oilseed exports.

Cordingley said the country continues to grow is global market share in terms of oilseed exports, with expanding canola production.

“Canada has a lot of big arrows going all over the world, and it’s dominance of the canola marketplace is impressive,” he said. “It represents 25% of production globally and 60% of the trade in canola.”

Demand of canola oil is going to continue to increase as a healthy alternative to other vegetable oils, he predicted.

“The food market is moving toward Canada’s advantage,” Cordingley said.

He said urbanization will become a dominant theme going forward as 5 to 6 billion of the projected global population of 9 billion people are expected to be city dwellers by 2050. Much of that urbanization is going to take place in Asia, where demand for agricultural commodities is projected to skyrocket over the next 35 years.

Canada, because most of its crop production takes place in its western half near the west coast ports, is in excellent position to be a supplier of choice for Asia going forward, he said.

“Canada is going to be increasingly dependent on China for its exports,” he said. “Canada exported 5.36 million tonnes of grains and oilseeds to China in 2012-13, which was a record.

“China took in 38% of Canada’s total canola exports for the year.”

Wheat will also continue to be an area of export growth for Canada, he said, and with the U.S. hard wheat crop under pressure from drought conditions in the central and southern plains, Canada should see an opportunity for increased shipments to the U.S. this year.

“That will be a key export opportunity for Canada should its logistics come around,” Cordingley said. “I see that immediate opportunity and the U.S. should continue to be a strong market for Canada in the years to come.

The other big export opportunity for Canadian wheat is in South America, where Argentinean exports have dropped by 3 million tonnes over the last three years, he said.

“They have really withdrawn from the global wheat market, which will provide Canada with a direct opportunity to export into Brazil,” Cordingley said. “The U.S. has taken the opportunity there in the last 12 months as Brazil is the second largest importer of wheat in the world and is looking elsewhere for supplies.”

GM Frustrations

One topic that was repeatedly mentioned by speakers, particularly those representing the larger agricultural trading companies, was the struggle to gain worldwide acceptance of genetically modified crops.

“I can’t tell you how far backward we have gone in the acceptance of GM crops in the last two years,” Page said. “About one-third of my opportunities to be at podiums like these are to try to convince skeptical audiences of the safety and environmental soundness of genetic engineering as a better way to feed ourselves.”

Brant Randles, president and CEO, Louis Dreyfus Canada, expressed frustration that the grain industry has been cast in a negative light on the GM issue despite there being no scientific evidence that GM crops pose a health danger to humans.

“I don’t accept the indictment that science is bad,” Randles said. “We’ve got some of the best minds pursuing advancement of humanity. How can we advance humanity and society when two-thirds of the world lives in poverty and is undernourished? How can their brains develop if they are not nourished in the first place? How can advancements be made in Africa if they can’t meet their dietary needs. I think it’s smug and I think it’s arrogant and I don’t accept the indictment.”

Richard Wansbutter, a consultant for Viterra, said feeding the growing population cannot be accomplished without global acceptance of GM crops.

“I don’t think anyone in this room, and I don’t even think the scientists in Europe and other jurisdictions, believe that we can really feed 9 billion people in the world according to the population projections for 2050 with conventional practices,” Wansbutter said.

Curt Vossen, president and CEO, Richardson International, said the grain industry has to do a better job of articulating why genetic crop engineering is beneficial. He said the industry has been too passive while opponents of GM have taken center stage to get their message across. “We can rail against the bias and unfairness and the lack of support for the claims and accusations being made, but I think we need to evolve away from that and go on the offensive,” he said. “In this case, the best defense is a good offense.

“We have let the antagonists in this issue wail way and say things that we haven’t effectively in this point and time challenged.”

Another example of this passivity by the industry, Vossen said, was when assertions that wheat-based foods were at the root of the obesity epidemic in the book “Wheat Belly” also went largely unchallenged by the industry until its message had taken root with consumers.

“How does a book like that rise to a level of prominence? Because as an industry we did not effectively oppose it, clarify it or respond to it in a repetitive way.”

Next year’s event

With a sold out event that exceeded expectations, the Canadian Grains Council couldn’t have been more pleased with the inaugural Canadian Global Crops Symposium held April 14-16 in Winnipeg, Manitoba, Canada.

“The conference far exceeded our expectations in several ways,” said Richard Phillips, president of the Canada Grains Council, which organized the event. “First, we were sold out and had to turn people away who wanted to register in the last week. Secondly, we were able to attract a very high caliber of political as well as domestic and international industry leaders. We received rave reviews from the people attending on the quality of the speakers and the opportunities for networking.”

The event, attended by grain merchants, farmers, government officials and representatives from grain trade associations, attracted nearly 250 delegates from six countries.

He said event organizers are considering adding a trade show to next year’s event and possibly adding courses at the Canadian International Grains Institute in Winnipeg.

“We are investigating the possibility of a trade show that could possibly have each of the Canadian commodity councils highlighting samples and attributes of the various Canadian grains to provide a ‘hands on’ feel and to answer technical, processing and nutritional questions,” Phillips said.

The symposium will once again be held in the spring.