Rail firm looks to grain

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Churchill Gateway Development Corp. photo The Port of Churchill is owned by OmniTRAX Canada, which is applying for a grain-handling permit to protect its investment.

When the Harper government passed the Marketing Freedom for Grain Farmers Act, it was generally understood that the Prairie grain-handling landscape was going to change.

But beyond an expected dramatic downsizing of the Canadian Wheat Board -- which, the Free Press reported this week, is now fully underway -- no one knew exactly what was going to happen.

Like any business whose main source of revenue is being threatened, the folks at OmniTRAX redoubled their efforts to find a Plan B.

OmniTRAX owns the Hudson Bay Railway and the Port of Churchill. The 500,000-plus tonnes of grain shipped on average out of the port every year was almost entirely due to CWB efforts to service certain overseas markets.

To protect its assets, the short-track railway and port operator may move into the grain-handling business.

Brad Chase, president of OmniTRAX Canada, said the company intends to apply to the Canadian Grain Commission for a grain-handling licence and will probably get its application in for this shipping season.

"What could happen in the future is that a producer could say he wants to sell his grain to store in Churchill for future shipping, or resell to someone else or for storage," Chase said. "It might make sense for us now to take title in certain circumstances."

Remi Gosselin, a spokesman for the Canadian Grain Commission, said it has not yet issued any more licences than normal, but there has been an increase in companies approaching the commission to learn more about the licence program.

"I imagine people are just waiting to see how the market will react to the changes as of Aug. 1, 2012," Gosselin said.

OmniTRAX operates a 140,000-tonne storage facility in Churchill, but it gets turned over a few times during the course of the August-to-October shipping season.

What might really aid OmniTRAX in its efforts to become more vertically integrated is if it were to have access to some inland terminal infrastructure.

Chase said OmniTRAX has had its eyes on an abandoned Viterra elevator in The Pas.

"It would be a good location for us to have a gathering system," he said. "We would be interested in buying that elevator if the right arrangement was there."

Sinclair Harrison, president of the Saskatchewan-based Hudson Bay Route Association, said with the potential for another round of consolidation in the country elevator landscape, it may mean another culling of country elevators. He said the $6.1-billion Glencore-Viterrra-Richardson deal will certainly not provide any more competition.

"If Glencore and Pioneer (Richardson's grain-handling division) chose to close assets or tear them down rather than make them available to others in the business, we would see that as negative," Harrison said.

The fact that none of the large private-sector grain-handling companies have terminal facilities in Churchill makes it seem unlikely they would use the port any more than they already did.

To their credit, the feds established a $25-million, five-year program of incentives for shippers who use the northern port.

If fully subscribed, at $9 a tonne and a maximum of $5 million a year, it would provide Churchill with a base level of business roughly equal to the average tonnage it's experienced over the past few years.

And that's exactly what's happened -- it is already fully spoken for.

So that means OmniTRAX can expect at a minimum to service its standard 15 ships out of Churchill this year. But the company has been trying to diversify its base for many years and may be taking this moment of market disruption to see if it can establish some new business.

Jeff McEachern, the new executive director of Churchill Gateway Development Corp., said there is no intention to rest on their laurels and be satisfied with "average" cargo volumes.

"We anticipate we will ship more grain than that. It is a relief that the incentive is oversubscribed, but it does not mean we have stopped working very hard," McEachern said. "Many opportunities are percolating. Exploring opportunities for inland facilities is definitely an option."

martin.cash@freepress.mb.ca

Republished from the Winnipeg Free Press print edition May 10, 2012 B5