A major Japanese farm co-operative and the Australian owner of Canada Malting are staking a new joint claim in Canada’s Prairie grain handling sector.
Tokyo-based Zen-Noh Grain Corp. (ZGC) and Sydney-based GrainCorp on Monday announced plans to build new grain origination sites in Alberta and Saskatchewan, through a 50/50 Canadian-incorporated joint venture to be based in Calgary.
GrainCorp said the companies are now “actively looking” at sites in both provinces for what will be “a fully integrated supply chain for the origination, marketing, storage, handling, distribution and exporting of Canadian grain and oilseed.”
The joint venture, dubbed GrainsConnect Canada, is budgeted for $120 million in its start-up phase, including construction and commissioning at its yet-to-be-chosen sites.
GrainCorp said it will put up $30 million from its own cash and debt facilities for that phase; Australian media report that ZGC will put up another $30 million. The joint venture will source the remaining $60 million from financial institutions, GrainCorp said.
Pending due diligence on potential sites and the customary regulatory and planning approvals, construction is to be staged “progressively” from the latter half of fiscal 2016 through to the end of fiscal 2018, GrainCorp said.
GrainsConnect considers Alberta and Saskatchewan “attractive” for their “reliability and high quality of grain production,” but the joint venture would consider increasing its footprint as the business grows, a GrainCorp spokesman said.
“This is an exciting opportunity to partner with one of the world’s most respected agricultural organizations and deepen our relationships with our international customers by growing our grain origination capability,” GrainCorp CEO Mark Palmquist said in Monday’s release.
The joint venture, he said, “will leverage GrainCorp’s existing Canadian footprint, including our Calgary marketing office and (Canada Malting) operations, plus Zen-Noh Group’s significant experience and customer relationships in exporting agricultural commodities from North America to Japan and other Asian destinations.”
GrainCorp said its existing marketing office in Calgary “will support the joint venture to manage the origination process with Canadian grain growers.” The joint venture is also expected to make use of the “close grower relationships” developed by Canada Malting.
The new business “also benefits grain and oilseed growers in the Canadian Prairies, by providing an independent and alternative pathway to market,” Palmquist said.
Calgary-based Canada Malting is GrainCorp’s current bricks-and-mortar stake in Prairie grain handling and processing. GrainCorp acquired the 113-year-old business in 2009, when it took over United Malt Holdings.
With capacity to produce 450,000 tonnes of malt per year — which makes it the biggest malting company in the country — Canada Malting has malt plants at Calgary, Montreal and Thunder Bay, plus 10 Prairie barley elevators.
ZGC is also already a known player in Canadian grain marketing. Since 2012 it’s operated a joint venture, CZL Ltd., with U.S. agrifood co-op CHS Inc., sourcing Canadian, U.S. and Australian wheat and barley for the Japanese market. A GrainCorp spokesman said the CZL joint venture will not limit the catchment area for GrainsConnect.
ZGC CEO John Williams, in GrainCorp’s release Monday, described the new joint venture as “a good opportunity to grow our business in Canada with a trusted partner” and “to strengthen further our ability to supply our customers in Japan and Asia.”
“Anything that increases competition for our grain is always welcome news,” Jim Wickett, a Rosetown, Sask.-area grower and chair of the Western Canadian Wheat Growers, said Monday in a separate release.
The Wheat Growers, one of the grower groups that lobbied for the end of the Canadian Wheat Board’s single marketing desk for Prairie wheat and barley in 2012, said the GrainsConnect announcement marks “another positive result” from that deregulation.
“The construction of new elevators on the Prairies will allow farmers to move more grain off the farm at harvest time, and should strengthen grain bids,” the group said, and will put grain “that much closer to being in an export-ready position, whether that grain ultimately moves through Canadian or U.S. ports.”
However, the group added, “increasing rail capacity will be important to ensuring farmers see the full benefits of this new investment.”
Discussions are already underway on “rail and port access” for the joint venture, GrainCorp said Monday. — AGCanada.com Network