Rolling with the changes
April 30, 2013
by Leo Quigley
The Canadian government’s move to strip the Canadian Wheat Board of its monopoly and provide farmers in Western Canada with “marketing freedom” has opened doors and created new opportunities for wheat, durum and barley producers north of the border.
It also has provided the handful of Canadian-owned private grain handling companies still remaining in Western Canada with the ability to market wheat and barley directly to customers, just as they marketed non-board crops such as canola prior to the change at the beginning of the new crop year.
Over the past decade, the fate of Canadian-owned, privately owned grain companies in Western Canada has largely been one of assimilation by larger U.S. or Swiss-owned multinationals or closure. Today, very few private firms with a significant network of delivery locations for wheat and barley remain compared to the hundreds that were in existence at the turn of the century. However, of the few, Paterson Grain and its parent company, Paterson GlobalFoods, are an example of those that managed to survive the era of mergers and network consolidation in Western Canada. The Winnipeg-based company and its president, Andrew Paterson, already have their boots on the ground, taking advantage of any opportunities that marketing freedom might present.
To grain farmers in Western Canada, Paterson elevators have been familiar landmarks since 1908 with their distinctive diamond logo and white exteriors.
Since taking over the helm of the family owned company in 2001, Andrew Paterson has put into play several strategic plans that have moved the company forward, including the sale of its shipping division in 2002 in response to global grain markets that were in the process of shifting from Europe and the United Kingdom to Asia, putting increased pressure on Canada’s West Coast ports of Vancouver and Prince Rupert.
Following the sale of the company’s Great Lakes fleet, Paterson launched an expansion and modernization program across the Canadian Prairies. Among these were the construction of high throughput terminal facilities (now nine in number), including facilities with grain cleaning capabilities that meant grain could be cleaned inland rather than being transported to an export terminal for cleaning, reducing volumes and rail shipping costs, and the construction of loop tracks at select terminals to provide for high speed loading of up to 130 rail cars.
However, the most significant changes Paterson made were in the corporate structure and goals of Paterson Grain. The first being to establish an overarching corporation, Paterson GlobalFoods Inc., and the second to put the firm on the road to becoming a vertically integrated company in Western Canada.
Today, while the grain handling side of Paterson GlobalFoods remains the largest source of revenue, the firm has strategically entered the food processing sector including milling and processing of grain, food and animal feed production, trucking, construction and seed production. In both the food production and animal feed sectors, Paterson GlobalFoods has moved strongly into the organic foods sector in Canada, Australia and worldwide.
“We’ve achieved significant vertical integration,” Andrew Paterson told World Grain. “That’s allowed us to progress and be efficient in everything we do. We’re a billion dollar-plus company in sales. We operate in many industries, but the largest part of our business is grain handling.
“We are in the seed, fertilizer and chemical distribution business and retail. We operate a single flour mill which is a specialty mill in Saskatchewan. We are in the livestock feed business. We are in the transportation business. We have a hazardous chemical transportation company and a general bulk transportation company. We are in the organic food business. We have a company that constructs facilities for us; we’ve been in the construction business for almost 100 years now. We also have a division that is involved in financing various aspects of the trade, including both agri-industry and producers.”
Most recently the company completed construction of the new Long Plain grain terminal in Gleichen, Alberta, Paterson Grain’s second facility equipped with a 130-car loop track. The first was constructed in Winnipeg to service both the company’s grain terminal and its NutraGro fertilizer plant.
Another key event that impacted the company recently was federal legislation that removed the Canadian Wheat Board monopoly.
According to Andrew Paterson, the change has “opened opportunities for us to build long-term relationships with our wheat and durum customers. In the past there was a monopoly where, if we did get a customer, we had to turn over the name (to the CWB) and we only got a chance to make one sale, and then they took it on their own books.
“Now we have a real chance to build a long-term relationship in those commodities, differentiate our product offering and expand our logistics network.”
He said the change has “absolutely” given Paterson Grain greater freedom to market into the U.S.
“Our company has been in business for 105 years,” he said. “We’ve operated before the wheat board, with the wheat board, and now without the wheat board again. So, we’ve been through the gamut. The opportunities are there, but it’s a competitive marketplace, both from the procurement and the sales side.
“But now the true values are being expressed, both on the procurement and sales side.”
Located in Regina, Saskatchewan’s capital city, the flour mill is part of NutraSun Foods Ltd. and is located in what is, arguably, Western Canada’s best 1CWRS wheat-growing region.
Paterson purchased the mill in 2003 for C$3.4 million and, following the purchase, made major upgrades to modernize the facility.
The mill processes both organic and conventional flours using Hard Red Spring and Hard White Wheat varieties, and is equipped with a laboratory for analyzing flour to ensure it meets customer specifications. It also produces a variety of bakery mixes, whole grains, pancake and waffle mixes, cookie mixes, dough conditioners and grain blends.
“It’s a small mill and a very small part of our company,” Andrew Paterson said. “It’s a specialized mill that does organics and specialty flours for various customers in North America. It’s an identity-preserved mill. It complements our other businesses, one of which is Growers International Organic Sales Inc. (GIOSI) that exports organic products grown around the world. GIOSI works with local growers who are interested in growing organic crops and assists them during the transition from conventional to organic production. You’ve got to be good at what you do in order to be successful at it. Many people have tried to get into the (organics) business and failed.
“We source product from Australia, China, South America, Europe and North America. We use worldwide arbitrage to run that business.”
Paterson has owned GIOSI for more than a decade, and over the years it has provided the company with steady sales in a premium market, he said.
“We have agents that work with us in other countries,” he said. “They have allowed us to expand our footprint and achieve worldwide arbitrage. We know all of the customers and have known them for many years. We centralize most of what we do out of Canada.”
Included among these agents is Xcan Australia Pty Ltd. that was purchased by Paterson GlobalFoods, Canada, in early 2002 and changed its name to Global Grain Australia Pty Ltd., focusing primarily on exporting organic and conventional Australian grains, oilseeds and specialty crops worldwide.
Some of the products sold by the company include: wheat, durum, canola, malting barley, feed barley, peas, chickpeas, beans, lupins, safflower (birdseed & oil), and vetch.
Included in the Paterson group of companies is an animal feed production facility, FeedMax, located in Killarney, Manitoba, that produces both conventional feed and organic feed.
Among its range of products for feeding hogs, cattle and poultry, geese, ducks and bison, the mill offers FlaxPure, a product that provides a high concentration of Omega-3 fatty acids.
When included in the feed ration nutritionally, rich flaxseed increases the Omega-3 levels in eggs and pork and provides animals, such as horses, with a shiny coat and improved health. The higher level of Omega-3 is also a marketable added benefit for health-conscious consumers.
In 2007, Paterson Grain led a consortium of two independent grain companies and four producer-owned grain terminals in the acquisition of what is now known as the Alliance Grain Terminal on the south shore of Port Metro Vancouver. The 102,000-tonne-capacity export terminal was formerly known as AUV and was owned by Agricore United (a farmer co-op that resulted from the merger of United Grain Growers and Agricore Cooperative) and was the result of a divestiture ordered by Canada’s competition bureau following the acquisition of Agricore Cooperative by United Grain Growers.
The terminal is owned by Paterson GlobalFoods Inc.; Parrish & Heimbecker, Limited; Prairie West Terminal Ltd.; Weyburn Inland Terminal Ltd.; Great Sandhills Terminal Marketing Centre Ltd.; and North West Terminal Ltd.
THE SKY’S THE LIMIT
Now a Paterson GlobalFoods’ subsidiary, PGF Biofuels was one of a small group of Western Canadian companies given the right to distribute a new Ethiopian mustard variety developed by Agrisoma Biosciences named Resonance, a carinata crop targeted at the biofuels industry and, particularly, the aviation sector.
At the time of the announcement early last year, Steven Fabijanski, CEO of Agrisoma, said: “The commercial introduction of Resonance to the marketplace is the final link in the biojet fuel value chain that connects Canadian growers to airline passengers, with many others performing critical roles in between.”
The company also said Resonance represents “an excellent new crop opportunity for growers by giving them a viable alternative for their rotation and enhancing their incomes, but also allows growers to participate in the flourishing bio-energy sector.”
Paterson described the fuel manufactured from the new variety as having an expanded carbon chain suitable for producing a biojet fuel that, unlike other biofuels, remains fluid at the cold temperatures experienced at high altitudes.
He said the potential for the fuel encouraged the company to “expand its footprint” into the biofuels market.
“But it’s all a function of price,” he said. “(At present) it’s not competitive with conventional fuels so that hurdle will have to be overcome.”
PATERSON'S ROOTS IN CANADIAN HISTORY
Norman McLeod Paterson was born Aug. 3, 1883 in Portage La Prairie, Manitoba. He was educated in Portage Public Schools and the Wellesley School in Toronto, Ontario.
Paterson began his career with the Manitoba Railway and Canal Company in 1897, and later joined the Great Northern Railway of Canada as a telegrapher. He resigned as purchasing agent in 1903. He then entered the grain business with his father, H.S. Paterson, in 1903 and went on to form N.M Paterson and Company at Fort William, Ontario in 1908. Several years later, he formed Paterson Steamships Limited. The grain and steamship companies were eventually succeeded by N.M. Paterson and Sons Limited. This company now owns and operates grain elevators in Manitoba, Saskatchewan and Alberta.
In 1940, Norman Paterson was appointed to the Canadian Senate by Prime Minister MacKenzie King. Senator Paterson was appointed Knight of the Order of St. John by King George VI in 1945. He served as the first chancellor of Lakehead University, 1965 to 1971, and retired from the senate in 1981 after 40 years of service.
Paterson Globalfoods Inc. Companies
NutraSun Ltd. - www.nutrasunfoods.com
FeedMax Corp. - www.feedmax.com
Growers International Organic Sales Inc - www.giosi.com
Indian Head Pulse Plant
Global Grain Australia - www.patersonglobalfoods.com/companies-globalgrain.jsp
PTC Construction Ltd. - www.ptcconstruction.com
Alliance Grain Terminal Ltd. - www.patersonglobalfoods.com/companies-agt.jsp
Alliance Seed Corporation - www.allianceseed.com
Inland terminals at:
Winnipeg North, Manitoba
Indian Head, Saskatchewan
Swift Current, Saskatchewan
Grain export terminal at:
Alliance Grain Terminal – Vancouver, British Columbia