Hey there, time traveller!
This article was published 14/4/2014 (1045 days ago), so information in it may no longer be current.
A banner 2013 crop year and some rail delays due to cold weather do not account for all our grain-transportation woes. Co-ordination of rail to ships is out of synch. A study by Quorum found rail shipments to the West Coast are down two per cent from last year, but there are excess ships waiting in port. In the east, grain shipments were down 20 per cent at Thunder Bay as of March.
This despite the record crop farmers harvested in 2013.
There is a direct correlation between the loss of the farmer-elected Canadian Wheat Board (CWB) and the current rail-transportation boondoggle, which will cost Prairie farmers over $5 billion in sales.
The CWB did more than sell wheat and barley for the benefit of Prairie farmers. It oversaw orderly marketing and grain logistics. If premium 14 per cent high-protein wheat was required by a buyer in Asia or Europe, it would be sourced from across the Prairies, placed in railcars, shipped to the designated grain terminals at the ports and placed on grain ships in a reasonable time frame. Even if there were rail delays, the single desk would sequence shipments through multiple terminals until a ship of 14 per cent wheat was full. The funds made from early 'dispatch' would go back to farmers.
Fast-forward to 2014. Every extra day a ship sits waiting to get filled costs $15,000 to $25,000 per ship. This demurrage is wasteful on all fronts. Moreover, co-ordination of port shipments is not being managed effectively.
The former CWB was mandated by law to act as the sole sales agent for wheat and barley for export and domestic human consumption. Over half the grain handled by the railways and elevator companies was directed by the CWB. If rail companies were not moving grain, the CWB was able to allocate cars and sue companies unwilling to fulfil the commercial obligations they made, to make that movement happen. After a winter of poor rail performance in 1997, the CWB sued both railways. CN settled out of court and CP lost, paying $15 million in damages to farmers. Railways had to pay up for their poor grain-handling that year. They did not mess with the CWB after this event.
Today, there is no regulatory body with this mandate or ability. The grain companies would not dare to fight the railroads since their elevators are largely captive to one of the railways, and extra costs incurred are passed back to farmers in the form of lower farm-gate prices. But do they need to? Farmers normally expect to get 85 per cent of the pie for their grain. Today, that share is 45 per cent. Grain companies are raking it in. A calculated estimate by the Canadian Wheat Board Alliance puts the total corporate bonus at $168.93 per metric tonne.
Federal Agriculture Minister Gerry Ritz continues to defend his actions. When confronted about not setting up a grain logistics oversight organization as part of dismantling the single-desk CWB, his response was, "We saw this coming. That's why we put together the Crop Logistics Working Group."
Study groups are not systems. And in this case, Ritz's team advocated for laissez-faire economics to allow the market to correct itself. The CWB would have seen this coming in August 2013. Ritz only took action in March 2014. He has bet the family farm on an ideological belief, which has turned into a $5-billion exchange of wealth from Prairie pockets to grain-merchant coffers. Reality is showing us how disastrous the dismantlement of the CWB is for the rural Canadian economy.
To address this situation, the farmer-elected single-desk CWB should be reinstated. We need grain logistics oversight that benefits farmers. Railways should be penalized significant amounts for lack of movement. The current $100,000 per day is not enough. Level the playing field by placing a cap onto oligopoly grain-company revenues, just as a cap exists for the railroads, which has proven essential in fighting exploitation by CN and CP.
Today, temptation for grain companies to manipulate the market from inland to port has become far too lucrative to resist. We now exist in a system that allows grain robbery to be legal.
Dean Harder is a Manitoba farmer, a proud member of the National Farmers Union and a Canadian Centre for Policy Alternatives Manitoba research affiliate.