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Editorial: Feeding the fish

There’s a familiar trope of editorial cartoonists that features a chain of fish, small to large, with each larger incarnation set to consume the next smallest, until the tiny, blissfully unaware minnow at the very end of the food chain.

It’s an image that’s been much on my mind lately as I’ve watched the latest round of consolidation in the agriculture sector. First PotashCorp and Agrium agreed to tie the knot. Then the Bayer-Monsanto deal was finalized. Both are still subject to regulatory approval, but the fact remains that from the corporate perspective they’re done deals.

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This all comes on the heels of wave after wave of prior consolidation that’s seen once-familiar brands and organizations disappear from the sector.

It would appear that the big fish are continuing to do what big fish do — get bigger. Meantime, on the farmer side, what’s happened is the opposite. The fish have got smaller.

That’s to say that at one point there were farmer-owned business entities like the Prairie pools which had significant market heft themselves and acted as your advocate. They were a historic response to the question of market power and for decades they were a central pillar of the western Canadian agriculture economy.

Over time however, they became unable to meet the expectations of their members. They began gobbling each other up before they were gobbled up by global corporations. I’m not arguing for a return to some golden past. The pools failed to overcome their issues and are now consigned to the dustbins of history.

But has the need for that sort of representation in the marketplace disappeared? I would argue not.

There are commodity groups of course that fill some of the gap. Important bits and pieces of what these entities did have also been picked up by agencies like Cigi, that do important market development work. But in an era of near-constant consolidation, is this going to be enough? Do farmers have enough market power to adapt to these changes?

Clearly some think not. Already farm groups like the U.S. National Farmers’ Union are lining up, calling for regulators to halt the deals. Closer to home the Keystone Agricultural Producers has expressed concern about what increased market concentration might mean to farmers. It’s pointing out the trend could mean poorer service to farmers and fewer companies means there’s a higher likelihood a single event could impact the entire value chain, with costs and losses downloading quickly to the farm level.

Central to this issue is the question of regulatory oversight. Of particular interest is the role of the federal Competition Bureau, which is responsible for ensuring that mergers don’t set up a dynamic where a few companies dictate terms to everyone else. Here Canada’s track record is far from exemplary.

A few years ago when the end of the CWB monopoly was at hand, I interviewed an Australian business academic who had closely studied the Australian Wheat Board privatization. I asked him to tell me about how the system there was now structured and he sketched a picture I think many farmers here would envy. Among other details, he noted that port infrastructure was open access, unlike the Canadian system. When I explained that wasn’t the case here, he wasn’t just puzzled, he was shocked.

“Where’s your Competition Bureau?” he asked.

I had no good answer for him, but I think this is a question all Canadians should be asking, including farmers.

If we look at other sectors, there’s pretty compelling evidence we’re not being particularly well served. Take the wireless telecom sector for example. Here the situation is so bad that consumers, out of frustration, have taken to referring to Robelus, a tongue-in-cheek way of saying there’s not enough difference between Rogers, Bell and Telus to bother distinguishing them.

These critics point to the suspiciously identical packages with near-identical service and costs and suggest that what we’re looking at is at minimum a crippling lack of competition. Meanwhile, there have been two jurisdictions where rates were better — Manitoba and Saskatchewan — both of whom have enjoyed a fourth carrier in the form of SaskTel and MTS. Here rates have been lower, and not just a little lower. In fact they’re nearly half what an Ontarian would pay for the same service.

That benefit appears to be on the verge of disappearing in Manitoba with the proposed Bell-MTS acquisition, and few seem to think the Competition Bureau will do much beyond rubber-stamping the bid.

While I’m no fan of red tape for its own sake, I am a fan of functional markets, and we should all expect our regulators to protect them.

About the author

Editor

Gord Gilmour

Gord Gilmour is Editor of the Manitoba Co-operator.

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