June 4, 2013 / 6:03 PM / 4 years ago

Canada grain handlers Richardson, Cargill plot divergent paths

WINNIPEG, Manitoba, June 4 (Reuters) - Canadian grain handler and processor Richardson International Ltd will look to the United States for growth by acquisitions, while Cargill Ltd favors building on its existing Canadian facilities, senior executives with the companies told Reuters.

The two agribusiness companies are also expanding their canola-crushing capacity, and say they are counting on farmers raising yields, rather than planting more land with the yellow-flowering oilseed, to supply the plants.

Cargill hired Jeff Vassart as its new Canadian president last week, while Richardson President Curt Vossen is planning the next move for a company that this year completed its biggest-ever acquisition.

Canada has become more attractive to global grain handlers since Ottawa scrapped the Canadian Wheat Board’s marketing monopoly for the western provinces in 2012.

Richardson, a 156-year-old private company based in Winnipeg, this year completed a C$900-million ($865 million) acquisition of Canadian country elevators and other assets from Glencore Xstrata PLC. The deal included a Nebraska oat-processing plant and Texas wheat mill, giving the company a U.S. beachhead to build on, Vossen said.

“Our size is such now in Canada that it would be problematic to grow much more beyond where we are now,” he said. “On an acquisition basis, we would probably look at grain origination outside Canada, (and) we would also look at processing capability in or outside of Canada.”

Plants that process crops Richardson already handles, like canola, wheat, durum and oats, make the most sense, Vossen said.

The United States, with a crop mix and trade patterns similar to Canada‘s, looks to be the most logical place to seek acquisitions, but opportunities are scarce, Vossen said.

Japanese trading house Marubeni Corp agreed last year to buy U.S. grain merchant Gavilon for $5.6 billion.

Richardson is roughly equal with Glencore as Western Canada’s two biggest grain handlers, after Glencore’s takeover of Viterra last year, and selloff of some parts to Richardson to satisfy Canada’s Competition Bureau.

Cargill has remained as the distant third-largest player, steadily expanding storage and rail capacity at some country grain elevators. Positioning itself as a seller of farmer services and processed crop products rather than just marketing the crop itself remains a strong focus, along with growing from within, Vassart said.

“We would never rule out opportunities but (organic growth) has been our strategy, it’s served us well and it’s likely what we would continue to look at,” Vassart said.

Both Richardson and Cargill are expanding their canola-crushing capacity to cash in on rising demand for the vegetable oil it produces. But Archer Daniels Midland Co , Louis Dreyfus Commodities and Bunge Ltd are also expanding in Canada, and farm analysts have questioned how much more canola farmers can grow.

“Capacity in (crushing) oilseeds is probably just about at a tipping point,” Vossen said, adding that more than half of Canada’s canola can be processed domestically, with more plants on the way.

“That’s getting close to saturation.”

Demand from crushers and export markets will require production well above the record 14.6 million tonnes harvested in 2011, and output should increase by several million tonnes annually over the next five years, Vossen said.

Greater production is likely to come from improved crop technology to boost yields, said Chantelle Donahue, Cargill Ltd’s director of corporate affairs.

Vossen agreed that higher yields, rather than more planted acres, will most likely produce the additional canola.

Western Canada is likely to see new global grain handlers enter the region in the coming years, but family-owned Richardson is not interested in selling, Vossen said.

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