Patient capital and faster grain handling will help G3 squeeze into a mature, tight marketplace, says Karl Gerrand, chief executive officer of Western Canada’s newest grain company.
“Our vision is to create an enterprise that focuses on high-efficiency movement,” Gerrand told Manitoba Co-operator editor Laura Rance Nov. 3 on stage at the Cereals North America conference in Winnipeg. “So it’s all based on efficiency.”
G3 is a joint venture firm majority owned by multinational, publicly traded Bunge, the world’s third-largest grain and food company and state-owned Saudi Agricultural Livestock Investment Company (SALIC) (see sidebar). In July it obtained the assets of CWB, formerly the Canadian Wheat Board, for $250.5 million — money which stayed in the new company. G3, which operates grain terminals in Thunder Bay, Trois-Rivières and Quebec City is also building a new terminal at Hamilton, Ont., and hopes to do the same in Vancouver.
“Our vision is to build enough infrastructure that we can… load grain faster… move grain faster by helping the railways… and… wherever possible at the export ports, unload those trains at high velocity and large volumes as well,” he said.
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By helping the railways, the railways “might favour us” when cars are short, he said.
Four of G3’s inland grain terminals (Bloom and Glenlea in Manitoba) can unload trucks in less than three minutes. They also have loop tracks that can load 134 cars (14,000 tonnes of grain) in 10 hours.
If G3 builds a Vancouver terminal it will also have a loop track keeping power and crews connected while unloading 134 cars in six hours — two to three times faster than the industry standard.
“I grew up on a farm and I know how hard it is,” Gerrand said. “Farmers need options for their grain and we think farmers and truckers are tired of waiting in line to unload their trucks.”
G3 has invested “hundreds of millions of dollars” in infrastructure.
“Bunge and SALIC have a very long-term view and they believe in Canadian agriculture,” Gerrand said. “I think once we get this Canadian infrastructure built, which is going to take us a few years — 10 years from now we will be enjoying the benefit.”
Western Canadian farmers who sell grain to G3 will not only be paid a competitive price but can share in its growth, Gerrand said. For every tonne of grain they deliver, farmers receive equity trust units worth $5. (The equity program started under CWB Aug. 1, 2013.)
“And the farmers get that equity free of charge with no risk,” he added.
“(T)here’s no downside, there’s only upside. Will G3 be successful? I’m betting it will.”
Gerrand acknowledged, however, G3 must succeed for the equity to have value.
Gerrand declined to provide any figures but did tell reporters later G3 is doing well.
“People are really getting excited about the new player in the market and we’re excited with the infrastructure that we have,” he said.
“We’re going to have a good year this year.”
And he sees more ahead.
“It seems to me the demand for Canadian wheat is going to be stronger than ever,” thanks to growing world population and incomes and Canada’s reputation as a grain supplier. “I think our system in Canada needs to be fairly nimble to handle that.”
That means improving grain transportation and supporting publicly funded agricultural research and grain quality control, he said.
Canadian grain companies can store about a quarter of the country’s annual crop production, while Australia and United States can hold two crops, Gerrand said.
“It means we are highly dependent on the rail system… that creates all types of challenges because that rail system isn’t operating effectively.”
Improving grain transportation requires the railways, grain companies and government to co-operate, he said. Bottlenecks include car shortages, shipping grain through the mountains and difficulties moving cars around Vancouver, Gerrand told reporters.
The railways have so many other natural resources to ship, grain companies need to make hauling grain more attractive to them, he added.
More grain can be shipped east too — something G3 will do. About 25 per cent of Canada’s export grain goes east now. Volumes will be determined by the market, Gerrand said.
Publicly funded research has helped Canada earn its quality reputation and the funding needs to continue, Gerrand said.
“I think the industry tends to focus on short term and there’s a place in research for public funding (which can work on longer-term problems),” he said.
Public research should continue in variety development and agronomics, Gerrand told reporters.
Government plays a necessary role in grain quality too, he said.
“It’s the assurances a global customer has in the systems we have in Canada to market that grain, to grade the grain, to ensure it’s the proper weight.
“It has been a very government-involved system and cutbacks are never healthy in that regard because we need to maintain that integrity. Does the industry need to step up? Absolutely, and the industry will step up and contribute but we can’t lose sight of the fact that we have a reputation that is very valuable to the marketing of grain in this country and we need to protect that.”