JUNE 1996
More than
Wheat: SaskPool is a
Major Diversified Company
by Tracy Sayler
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Prairie Grains is the
official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain Growers Association,
South Dakota Wheat,
Inc., and the
Minnesota Barley
Growers Association.
There's a lot more to the SaskPool, however, than wheat. It is an integrated, diversified agri-business with full and partial ownership of well over 20 affiliated companies, which process and market everything from fish, fertilizer, cattle and ethanol to malt, canola oil, donuts, and newspapers.
The Pool still operates as a cooperative with about 80,000 members, of whom about 57,000 are farmers and primary customers. But the business today is much more diversified and far-reaching. In fact with the reorganization of its share capital structure, SaskPool this year aims to be Canada's largest publically-traded agribusiness company: the $360 million (Canadian) business has been listed on the Toronto Stock Exchange since April, 1996.
Started in 1924 as a farmer-owned cooperative, SaskPool was designed to market farmers' grain through an elevator network established throughout Saskatchewan. To this day, grain handling and marketing continues to be the SaskPool's core business, generating about half of the company's operating profit. In its fiscal year ending July 31, 1995, the company's grain handling sector generated about $2.9 billion (Canadian).
The Pool collects grain through its elevator system, ships it to inland terminals or port terminals, cleans it to meet regulatory specifications and then sells it to end users in the domestic or export markets, either as an agent of the Canadian Wheat Board or for its own account.
SaskPool and Cargill Ltd, recently announced plans to jointly build a new export terminal near Vancouver, to serve the growing Pacific Rim market. Construction of the terminal, at about $175 million (Canadian), is set to begin this fall and be operational by mid 1999. Together, SaskPool and Cargill now originate about 40 percent of all grain handled by elevators in western Canada, and control two-thirds of western Canada's inland grain cleaning capacity.
SaskPool has four other divisions, in addition to grain handling and marketing: farm supply sales, food processing, livestock marketing, and publishing. Besides handling and marketing more grain and oilseeds than any other company in Canada, the Pool has been an aggressive pursuer of sole and joint value-added and diversified ventures. A look at some of SaskPool's diversified investment interests:
Livestock - Heartland Livestock Services is a livestock marketing venture with Manitoba Pool Elevators. SaskPool has 89.8 percent ownership. Heartland and its subsidiary handled 776,000 head of cattle in the last fiscal year.
Publishing - Sask-Pool owns The Western Producer, which has the largest circulation (96,000) of any farm newspaper in Canada. SaskPool also owns a majority interest in PrintWest Communications, a publishing company.
Farm inputs - Farm supply sales from crop protection products, seed and seed treatments, fertilizer, farm tools, equipment and livestock supplies totaled about $358 million (Canadian) last year, accounting for about 16 percent of SaskPool's operating profit.
Donuts - SaskPool owns 35 percent of Robin's Foods Inc., franchisor for Robin's Donuts, a retail chain of stores that sells baked goods in Canada.
Malt - Prairie Malt Ltd, produces and sells malt for the brewing industry; SaskPool has 42.4 percent ownership. Prairie Malt recently established a joint venture in China, allowing direct access to one of the fastest growing malt markets in the world.
Ethanol, by-products - Pound-maker Agventures Ltd operates an ethanol plant, cattle feed lot, and feed mill at Lanigan, Sask., with the Pool and Heartland each having an ownership share of 11 percent.
Canola oil - CanAmera Foods crushes, refines, packages, and retails a broad line of edible oil products nationally and internationally. The company, which is Canada's largest edible oil processor and exporter, is owned 33 1/3 percent by the Pool through subsidiaries.
Micronized grain - InfraReady Products Ltd is a wholly-owned subsidiary of SaskPool based in Saskatoon to produce and market micronized grain and related products. Micronization is a process by which grain is subjected briefly to a high temperature to improve taste and shelf life, decrease cooking time and improve nutritional value. The process is well-suited to peas, beans and lentils as well as cereal grains.
Beauty, health products - SaskPool has 20.8 percent ownership of Bioriginal Food & Science Corp., which develops and markets natural food products and supplements, and health and beauty products.
Bakery ingredients - Sask-Pool owns CSP Foods, Canada's largest full line distributor of bakery ingredients such as jams, glazes, and fillings. And last year, SaskPool went from half to whole ownership of Dawn Foods Canada, a related bakery ingredients supplier.
Many of SaskPool's agri-processing ventures have come about only since the mid 1980s. Not by happenstance; through strategic business positioning. SaskPool expects to benefit from changes in agriculture arising from deregulation, particularly in international trade and rail transportation, and the growing demand for food globally.
Especially value-added products. The mix of food trading is changing significantly from unfinished primary products to more highly processed intermediate or finished products. The United States is currently the destination for about half of the processed foods which Canada exports. It is a lucrative market: since 1991, Canada's exports of processed foods to the U.S. have grown by about 10 percent each year.
But the SaskPool realizes that attention must also be given to rising incomes in developing nations, particularly in the Pacific Rim, which will allow consumers there to purchase more nutritious, higher quality and more expensive processed foods and ag commodities.
The Manitoba Pool and Alberta Pool systems are also involved with value-added investments. However, with the Manitoba Pool one-fourth the size and the Alberta Pool one-half the size of SaskPool, their capital resources are more limited.
Why do some farmers in Canada want to establish their own value-added initiatives, when the Pools are becoming active in that very area? Likely because some pool members there may share the same discontent as some members of large regional U.S. co-ops: they feel detached from the corporate business and want more direct influence over their profit potential.
"It's true that with our structure, the value-added linkages aren't as distinct. The farmer who just delivers wheat and barley to the elevator may have a hard time identifying with it. Under closed co-op initiatives, people can directly identify and have direct input in it," says Dan Schmeiser, a manager with SaskPool's policy and economic research division. "We have our supporters, we have our detractors. I like to think there's enough room for all of us."
SaskPool plans to continue its expansion into value-added through outright purchases, strategic alliances, joint ventures, and new operations. Indeed, a direct link with Saskatchewan producers, its developing expertise in food processing, and its diversified financial position are strong legs to the chair SaskPool is pulling to the global agribusiness table.