Stewart Wells and the AGT Pasta Plant

[Hopperbin]

"create opportunities and synergies"...yep words right out of pro public relations firm's workbook.

This company was built on synergies.

Alliance Grain Traders
Alliance Grain Traders (TSX:AGT) is the largest lentil and pea splitting company in the world. As a trusted source for value-added processing of pulses, we buy lentils, peas, beans and chickpeas from farmers around our 27 facilities located in the best pulse growing regions in Canada, the United States, Turkey, China and Australia and ship them to over 85 countries around the globe. We create value for producers, quality products for our customers and growth for our shareholders.

Alliance Grain Traders was founded in 2007 with the acquisition of Saskcan Pulse Trading by the Agtech Income Fund, the predecessor to Alliance Grain Traders. The fund was re-branded Alliance Grain Traders Income Fund and a new leader in the global pulse industry was born. In 2009, Alliance Grain Traders completed a conversion to a dividend paying corporation and completed a transformational acquisition of The Arbel Group creating the global leader in the processing, trade and export of pulses and specialty crops. The acquisition also included the Arbella Pasta brand, the third-largest selling domestic brand of pasta in Turkey that is also being sold in 60 countries worldwide, and the largest bulgur and durum wheat semolina milling facilities in Turkey.

Global operations also include Australia Milling Group, located in Victoria State, Australia; Alliance Tianjin Grain Co., located in Tianjin, China; and United Pulse Trading, located in Williston, North Dakota.

Alliance Grain Traders was founded on the following mission statement, based on the operational philosophy that has made all areas of the group a leader in food products:

"To provide a clean and quality product with reliable and timely shipments, competitive pricing and flexible delivery arrangements for bulk, bagged and packed pulses and foodstuffs. Our commitment to supply guaranteed quality to our clients is ensured through comprehensive production, execution and quality control."

This philosophy is part of our guiding principle "From Producer to the World".

Alliance Grain Traders is an active exporter to all geographic regions serving a network of customers in the Americas, Europe and Asia. The company currently employs 400 full-time staff and is actively exporting to 85 countries. The core business of Alliance Grain Traders is supplying customers with premium quality Red Split and Football Lentils, Kabuli Chickpeas, Laird/Eston/Richlea Lentils, Yellow Split and Whole Peas, Green Split and Whole Peas, Whole and Split Desi Chickpeas, Navy Beans, Pinto Beans, Dark and Light Kidney Beans, Black Beans, White Beans, Faba Bean and other specialty crops such as canary seed. Alliance Grain facilities feature systems for cleaning, calibration, peeling, splitting and color sorting lines on a full line of pulses.

Through The Arbel Group, its subsidiaries in Turkey, Alliance Grain Traders also offers beans, rice, milled durum wheat and bulgur products. Through the Arbella brand, Alliance Grain offers a full line of packaged pasta products for the domestic Turkish market as well as for export.






Arbel Group
Arbel has been a supplier of food products and other goods and services for more than half a century. Arbel Pulse Grain Industry & Trade S.A. maintains its production facilities in Mersin, Turkey with a daily capacity of 4,000 metric tons. The company is the largest exporter in Turkey for pulses, exporting to all geographic regions and serving a network of customers in the Americas, Europe, Africa and Asia.

The Arbel Group facilities in Mersin are located on a 1,000,000 sq. ft. parcel of land equipped with 38,000 metric tons storage capacity steel silo facilities and more than 50,000 metric tons storage capacity in horizontal warehouses. Arbel maintains its leadership role in production and processing through a continuous Research and Development program.

Arbel S.A. facilities include cleaning, calibration, peeling, splitting and colour sorting lines for the production, processing and export of red split lentils, whole red lentils, green lentils, chickpeas, white beans, bulgur, pasta, semolina, durum wheat and wheat flour. Trading activities include rice, edible oils and crystal sugar, vegetable oil, salt, potatoes, fresh fruit and vegetables.

For over 20 years, Arbel has been a leading supplier of food and emergency relief items to international development agencies, NGO sector and aid relief operations. Arbel has introduced Tüv Cert EN ISO 9001:2000 Quality Control System to assist the company in promoting and expanding its marketing activities throughout the world. The company has diversified its activities into the tourism and hospitality industry through a resort development of 100 acres by the Mediterranean Sea including a motel/restaurant and camping resort.

In 2009, all food production-related operations of the Arbel Group were acquired by Alliance Grain Traders.






Saskcan Pulse Trading
In 2001, the Arslan Family, principles of Arbel, established Saskcan Pulse Trading Inc with Alliance Grain Traders President and CEO, Murad Al-Katib. Within five years, Saskcan Pulse grew from a small start-up company to being awarded the Saskatchewan ABEX awards for "Best New Venture" in 2003, "Exporter of the Year" in 2004 and capping off by winning "Business of the Year" in 2005.

Today, Saskcan Pulse Trading operates 12 facilities across Western Canada including the largest lentil and pea splitting plant in the Americas, expanded capacity in lentil and pea processing at other facilities and new platforms for bean production. The Saskcan Pulse Trading brand of pulses is known in all major pulse markets as the quality brand in the marketplace.

[jdepape]

When I heard the news of the Alliance Grain Traders proposed $50 million durum and pulse processing facility, my first thought was “This is such positive news - what could CWB supporters possibly find as downside?"

Well, they think they found it and it didn't take long before they were out in public spinning their version of the truth.

• Bill Gehl, Canadian Wheat Board Alliance chairman said: "If this company has a viable business plan, the single desk should not be an impediment to their project."
• Stewart Wells, CWB director said: "There's no reason why anyone with a good business plan wouldn't be able to build their operation and still have a strong Wheat Board that's getting a fair price to farmers for their grain."
• Terry Boehm, NFU president said: "It's perfectly possible to have a pasta plant whether the CWB is there or not. Unless, of course, you're building a plant with the assumption that when the CWB is gone that you'll be able to access durum cheaper than you could have through the Canadian Wheat Board, which means less money for farmers."
• Allen Oberg, CWB chairman said: "Distance from domestic and export markets – not the single desk – is the biggest impediment to value-added processing plants in Western Canada."

Although none have ever had anything to do with an agricultural processing enterprise, these “spokesmen” somehow feel equipped to explain why they think the single desk is not an issue and why locating on the prairies doesn't work. (And in the process, they insult Alliance Grain Traders CEO Murad Al-Katib by implying he doesn’t know what he’s doing.)

Gehl goes so far as to say transportation costs limit canola processing on the prairies: “Whether it is wheat flour, pasta, oil sands bitumen or canola, transportation costs have always limited what can be done with value adding on the prairies." Perhaps he’s had his head elsewhere for so long that he hasn't noticed that there are now ten canola crushing plants on the prairies, processing close to half the crop - and many are expanding as we speak. Domestic crush is clearly a dominant canola market influence. I would love to be a fly on the wall listening to Gehl explain to Cargill, Bunge, Viterra, Richardson and Louis Dreyfus that they’ve got it all wrong and shouldn’t have built their crush plants on the prairies.

I’d also like to hear any one of them explain why oat processing is so successful on the prairies and why durum is being processed in North Dakota – both in the heart of production regions, miles away from the major consumptive areas. (And both without the CWB single desk in their way.)

Boeme suggested that the only reason a processor would locate in the prairies is to get cheap grain for his plant. Perhaps he should get together with Oberg and Gehl and decide which is the best argument for them - either it's good to locate in the prairies to get cheap grain or it's bad because of the distance to markets. If Oberg is right, Boeme is wrong. If Boeme is right, Oberg is wrong. Ironically, they’re both wrong. Check out the price of canola around Yorkton where the two new crushing plants have certainly supported prices.

Actually, there are many factors that go into the decision of where to locate; reliable supply of feedstocks, greater control of quality and logistics are among the most important. Locating near a consumptive market means that you are out of position for other possible markets; locating near the supply of raw materials (like in the prairies) provides ready access to the materials you need while allowing you to serve more and varied markets.

More processing on the prairies is an effective counter to concerns over grain handling issues like terminal access, car allocations, and primary elevator congestion. Since the CWB and its allies have always seen these as big issues with an open market, you’d think they would recognize that a new processor on the prairies actually helps alleviate these potential problems.

And yes, the single desk is a deterrent to new investment. As any processor will tell you, they are running a factory, producing a product someone else is relying on. One of the most important factors in establishing a processing business is to be a reliable supplier; and what that means is control. One misstep and you could lose a major customer. An environment where your single supplier is also a regulator is not attractive to prospective investments. Open markets facilitate business by allowing you to respond the way you see fit; regulated markets frustrate business by being unresponsive or by changing the playing field without warning.

Western Canada lost three potential malt business investments due to the single desk. Under the circumstances, they all did the right thing. Because they were uncomfortable with the prospect of dealing with only one supplier (the CWB) they built in Montana and Idaho where they could access both local barley as well as imported barley from the CWB. The Canadian malting industry has even told both the CWB that as long as the single desk is in effect, they will not invest in any expansions in Canada.

The CWB and its allies wish the single desk was not a deterrent to new value-added enterprise in Canada, but it is. Their arguments lack substance or factual support and even go against conventional wisdom.

Through its actions, the processing industry has demonstrated the realities of dealing with both the single desk and the open market for years, showing its preference for the open market. Now, as we are beginning to see the response to an open market in wheat and barley, the CWB and its allies still fail to respect reality.

Actions speak louder than words. Saying something over and over hoping it to be true is just wishful thinking. And gentlemen, you don't build a prosperous industry on wishful thinking.

[wilagro]

jdepape: I'm sure you recognize "spin" since it seems to be your specialty these days. I was wondering as to how long it would be before you got your oar in the water.

[jdepape]

What makes you think my oar's not in the water?

[Happytrails]

Opposition to this plant is too stupid for words. Gives me the willies. HT

[wmoebis]

I think this is great news and long over due.

However I have questions. Since the CWB is still in place and may or may not be gone in the near term, is this anouncement contingent on it's removal?

Secondly, The pasta plant in ND buys AD from Canada, I would think it has to go through the CWB, so what is the dif it was built in Canada or the USA? It can't be all to do with the CWB. If the CWB is selling so cheap why haven't these companies been building here all along? Seems to be mixed messages.

[gustgd]

I would say it is contingent on the removal of the single desk.

The thing most comentators miss is the importance of the GTH (global transportation hub) This allows the finnished product to be shipped in a timely manner anywhere in the world.

[charliep]

wnoebis

I don't think you can call the domestic millling price cheap under the current system. Would be interesting to find out what farmers understanding of how CWB pricing to millers works.

My understanding (perhaps memory from the past) is pricing to domestic millers is a North America based price adjusted for location. I don't hear millers complaining one way or other about the price - reflects the market with the benefit all millers get the same price. Also domestic millers are offered a number of products including basis contracts, etc as well as supply agreements.

What I do hear complaints about (more so maltsters) is the lack of relationship between what a flour mill is paying for wheat and the price/price signal the farmer gets. It is difficult to develop supply chain relationships with farmers including delivery commitment. One of the reasons why soft white spring wheat is handled differently.

The argument is really whether farmers have the skills to market their crop for an above average price. It is also about developing a domestic value added and reducing Canada's dependence on low priced/high logistic cost durum markets around the world (bottom end of the CWB returns to pool table/daily pricing opportunities). The volatility in durum prices (more so than other wheats) reflets the tight relationship between too much and too little durum production.

[Hopperbin]

Charlie I think you said it correctly, its likely not all about price but securing supply and direct to farmer relationships.

[blackpowder]

I do try not to be influenced by the 'pig in the mud' crowd.
But damn it, to be be against any type of value adding for any sector of the economy is the damndest thing I've heard yet.
I now question what some of you do for a living.
'Export or nothing' is just another 75 year old mandate we have never been able to question!

[charliep]

For what it is worth, Canada processes about 250,000 tonne of domestically consumed durum (used in Canada as semilina/pasta) and exports the equivalent of 30,000 tonnes of durum. That compares to 3.5 million tonnes of durum exports. Been that way since the beginning of time.

[jdepape]

Al-Katib also stresses his company is not receiving any government incentives to build the Regina plant, even though he says it would not have gone ahead without a change to the Canadian Wheat Board's single desk selling system for wheat and durum.

"If we could not buy the durum wheat from the same farmer that produces the lentils, peas and chickpeas for us---we would not have a pasta plant in Saskatchewan."

http://www.saskatoonhomepage.ca/index.php?option=com_content&task=view&id=35622&It emid=424