Sunday's approval by Canadian Industry Minister Christian Paradis moves the transaction a step closer to closing, though approval is still needed by China's Ministry of Commerce.

Glencore in March offered to pay C$16.25 per share for Viterra, which owns the largest share of Western Canada's grain storage and farm supply outlets, as well as nearly all grain storage capacity in South Australia.

The transaction anticipates Glencore's sale of some Viterra assets to two Canadian agriculture companies, Agrium Inc and privately-held Richardson International Ltd.

In granting approval, Paradis said the Viterra takeover is "likely to be of net benefit to Canada."

Paradis also cited commitments that Glencore has made, including a boost to Viterra's capital spending by more than C$100 million over five years, work on initiatives with Manitoba and Saskatchewan governments, and charitable contributions.

Chris Mahoney, director of agricultural products at Glencore, said the approval "recognizes the long-term benefits for farmers and Canada."

The acquisition would make Glencore a stronger rival to agriculture companies including Archer Daniels Midland Co, Bunge Ltd, Cargill Inc and Louis Dreyfus Corp. These companies are sometimes referred to as the industry's ABCD quartet.

It could also help Glencore, which is based in Baar, Switzerland, benefit from growing global demand for food, especially as diets and incomes improve in China and India.

Viterra controls nearly half the grain-handling market share in Canada, the biggest exporter of spring wheat, durum and canola.

Glencore anticipates transferring most of Viterra's retail agri-products business, including a 34 percent stake in Canadian Fertilizer Ltd, to Calgary-based Agrium for C$1.8 billion.

Richardson, which is based in Winnipeg, would acquire 23 percent of Viterra's grain-handling assets and some North American processing assets for C$800 million.

Glencore said approval from China is not expected before the end of July. Canada's independent Competition Bureau has said it will not oppose the Viterra takeover, but has not ruled on the transactions with Agrium and Richardson.

In 2010, Canada blocked the roughly $40 billion takeover of Potash Corp of Saskatchewan by Australia's BHP Billiton Ltd, the world's largest mining company, because it did not provide a "net benefit" for the country.

(Reporting by Rod Nickel in Winnipeg, Manitoba and Jonathan Stempel in New York)

By Rod Nickel and Jonathan Stempel