Agricore replaces UGG

FTLComm - Valparaiso - Monday, October 21, 2002
The reorganisation of Western Canada's grain handling companies has been a truly enormous undertaking as it became clear that if more profits were to be made from grain handling the work force had to be reduced. The one decision which seemed to have been arrived at by all of the major companies meant that to cut the number of people you had to increase the size of elevators and in effect, replace all the grainhandling facilities.

The cost of such an undertaking definitely makes one wonder how these financial wizards think. Despite the overwhelming evidence that the whole concept was not going to work, the "big is better" approach was pursued relentlessly. Ultimately, the result of the transistion would have devastating affects on Western Canada. With fewer grain handling operations the railway companies needed fewer lines and they offered considerable encouragement to the grain companies to proceed. When it came to bottom lines, the results are really remarkable. The profits that the grain companies had hoped to gain were passed on directly as added costs to the farmer, who now faces transportation costs of about the same amount to get his product from the farm to the terminal, as it cost to move the product from the terminal to port. If the railway shipping costs had remained the same it would only have meant that farmer costs of transportation would only have doubled but that was not the case.

The railways saw this as a chance to improve their profit margin and since this process began, the cost of moving grain has risen not in percentage points, but in multiples. The attempt to improve profits for the grain companies also occurred as a drought took hold reducing the volume of product and the world market prices were at an all time low.

With the cost of handling grain skyrocketing, farmers faced with low yields and low prices, the result has been predictable. Farm size has magnified, rural population chopped and profits for everyone, something people talk about in the good old days.

In actual fact, the grain companies were not all part of the scheme. Saskatchewan's Wheat Pool with its leadership bent on making their company into some corporate giant lead the way and since it was the largest player in Canada, the others had to follow suit.

Alberta Wheat Pool and Manitoba Wheat Pool, like the original Saskatchewan Wheat Pool were farmer owned and operated cooperatives. Both were a fraction of the Saskatchewan Wheat Pool in size but realised that if they worked together they could cope in this wild and wooly marketplace. Together they formed Agricore. United Grain Growers was not a true coop, but was and remained a farmer owned and operated grain company. A year ago it was decided that if they combined with the newly formed Agricore they would have a fighting chance. It was already apparent in November of 2001 when the
official announcement was made, that the company that started this crazy scheme to wreck all existing elevators and build all new ones, the Saskatchewan Wheat Pool, that it was not only in trouble, but it is just a matter of time until it is sold at a wicked loss, as its was then already owing far more than it had in real property.

UGG and Agricore made solid business sense and since both were smaller. They were not faced with the same catastrophic debt management that faced the dwindling holdings of the Saskatchewan Wheat Pool. The other measure that substantially put Agricore ahead financially was the retention of a lot of its original and profitable wood elevators. By reducing the speed of growth they maintained a positive cash flow as the new concrete terminals were added.

Here in
Tisdale UGG was the last company to erect its concrete tombstone and the last to knock down its wood structure. On Friday in the snow storm, the UGG sign came down and Sunday the new Agricore sign went up. The daylight pictures on this page were taken Saturday before the new sign was put up and the one at the top of the page was made close to eight last night. You can e-mail the Valparaiso terminal

Timothy W. Shire


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