Winnipeg Free Press - PRINT EDITION

Handlers planning boost in grain storage

New realities of open market force industry action

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The press release file of late has been full of announcements from Canadian grain handlers outlining their plans for investment in new and expanded facilities.

Add them all up and there are about 150,000 tonnes of additional commercial storage coming into play across the Prairies in the next year, an increase of 1.3 per cent over the current 11.6 million tonnes in 415 facilities. Chances are, there will be a few grain bins going up on farms this year too.

On one hand, it's not surprising attention would turn to increased storage, given last year's bin buster of a crop and this winter's sluggish export movement. Last fall's harvest was so big farmers and grain handlers were forced to implement temporary storage, including piling it on the ground. They can get away with that for a few months in the fall and winter, given our cold, dry climate, but come spring, the quality rapidly deteriorates.

"As the weather warms up in the spring and summer, there is a great risk of grain spoiling due to insect infestation, mould growth or rodents," said University of Manitoba grain storage researcher Digvir Jayas. He advises farmers to move grain out of plastic bags, Quonset huts or ground piles and into aerated bins before spring thaw, or risk dramatic quality losses.

All this new investment in permanent commercial-handling and storage marks an abrupt about-face after decades of downsizing and streamlining in Canada's grain-handling capacity. For example, in the late 1980s there were more than 1,800 grain elevators spread across the Prairies with a total capacity of more than 15 million tonnes.

The new builds are partly because there is another player on the scene -- the new CWB -- which must invest in grain-handling facilities if it is to survive after the government backing ends in 2017. When it was a single-desk marketer, it delivered its export program through private operators. Now it is in competition with them.

There also appears to be general recognition within the trade of a need for surge storage capacity that wasn't there before.

The Canadian export system, which many accused of being over regulated and inefficient, has historically demonstrated a remarkable rate of turnover in flowing commodities to export when compared to our neighbours to the south.

Throughout the middle of the last century, the U.S. government subsidized the construction of commercial storage to help manage that country's surplus production. As of January 2014, U.S. commercial-storage capacity was at 10.4 billion bushels -- roughly enough to store half of all the corn, soybeans and wheat U.S. farmers produce.

That has two implications. It means U.S. farmers don't need to invest nearly as much in on-farm storage, which frees up capital for other investments. As well, grain assembled in a commercial position is more readily accessible for end-users to pull into the supply chain.

By comparison, Canada's commercial system can provide storage for approximately one-sixth of last year's crop. Complicating this, however, is the fact Canadian farmers grow a wider mix of commodities -- five major crops and a host of specialty crops --that are being delivered into that system. Some of those commodities, such as wheat and barley, are segregated by class according to their end-use characteristics and grades, according to their quality. So it isn't just about the overall space; there is a greater requirement for bins.

The U.S. commercial system doesn't allow for anything near that level of segregation, especially for wheat.

Western Canadian farmers export upwards of 50 per cent of what they produce, and 94 per cent of it moves by rail, whereas their U.S. counterparts only have to reach tidewater with about 23 per cent of production and much of that can move by barge. Plus, Canadian farmers have fewer export outlets and their capacity is constrained. Two out of the three ports serving Manitoba farmers -- Thunder Bay and Churchill -- are shut down during the winter.

These fundamental differences between the two countries were often ignored during debate over orderly marketing versus the open market. Now there is an open market, the industry is facing some new logistical realities.

 

Laura Rance is editor of the Manitoba Co-operator. She can be reached at 204-792-4382 or by email: laura@fbcpublishing.com

Republished from the Winnipeg Free Press print edition April 12, 2014 B10

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