Structural Change in Grain Handling

1
Structural Change in Grain Handling

• A case Study of UGG
• Jorge Mendez Manzanilla

2
History of UGG

• Grain Growers Grain Company started in 1906
• Headquarters in Manitoba, branch office in
  Alberta opened in 1909
• Merged with Alberta Farmers Cooperatives in 1917
• Company grew and expanded to include
• Farm Supplies Division
• United Livestock Growers
• UGG Sawmills Company Limited
• UGG Securities Company Limited

3
Over the 1990s
4
UGG Share PricesJuly 1997-June 2002
5
Return on Equity
6
Debt to Equity
7
Long term debt/Equity
8
Current Ratio
9
Market Share
10
Why Archer Daniels Midland?

• Feb 1997- Daryl Kraft saidI dont think ConAgra
  or any other U.S. agrifood giant would be
  interested in UGG, because of the monopoly in
  buying and selling grain maintained by the CWB
• May 1997 Daryl Kraft says the merger with ADM
  is obviously long term planning. They are
  assuming they wont have to deal with the CWB in
  5 or 10 years. Clearly theyd like to control the
  grain without having to negotiate with an
  intermediary

11
Foreign Direct Investment

• Reasons for investment
• Barriers to trade
• National infrastructure
• National resource endowments
• Intellectual capital
• Growing the market
• Relative cost

12
Conclusions

• ADM now owns 25 of Agricore United
• UGG, Alberta Wheat Pool, Manitoba Pool Elevators
  are no longer cooperatives
• Larger multinational company is able to take
  advantage of economies of scale, spread
  development, marketing costs over a larger
  volume, captive input supplies
• ADM motivation likely affected by the relatively
  low price of Canadian firms