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Winnipeg Free Press - PRINT EDITION

Tories help 'marketing freedom' along

Posted: 03/29/2014 2:08 AM | Comments: 0

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Idle grain cars sit on the tracks south of Kemnay, Man. Slow delivery of last season's bumper grain crop to West Coast ports has $14 billion to $20 billion of it sitting on farms, Ottawa estimates.

BRUCE BUMSTEAD / BRANDON SUN FILES Enlarge Image

Idle grain cars sit on the tracks south of Kemnay, Man. Slow delivery of last season's bumper grain crop to West Coast ports has $14 billion to $20 billion of it sitting on farms, Ottawa estimates.

It was clear from the day they were first elected that the federal Conservatives had an agenda to deliver "marketing freedom" to western Canadian farmers. But beyond that, there was no plan.

Now, less than two years into a so-called open market, we have the unprecedented scenario of a government-owned company purchasing and constructing grain-handling facilities in direct competition with the private sector, and legislation placing two politicians in charge of dictating to the railways how much grain they should move.

The new CWB, which the federal government committed to carrying for five years after it eliminated its single desk and fired the farmer-elected board of directors in 2012, purchased Mission Terminals at Thunder Bay last year. Just last week, it announced construction had started on the first of a planned network of grain-handling facilities across the West.

The only way a privatized CWB can survive is if it gains access to its own handling network, and more competition in the grain business is no doubt a good thing. But to have taxpayers backstopping the effort strikes at the core of the ideology behind opening up the market in the first place.

Meanwhile, the federal transportation and agriculture ministers announced new legislation last week that would enshrine their authority to impose performance targets on the railways for grain shipments. One can assume that placing elected officials in charge of grain-train logistics means export movements will be stellar in election years.

Few would disagree that something had to be done to get the grain moving out of Canada this winter. Not only are there huge economic repercussions from allowing the status quo to prevail, but it is the people of the rural West who pull out their chequebooks when they get those letters seeking help for the Conservative cause.

Farmers have risen to the call that says they need to boost their productivity in order to feed a hungry world, and the federal agriculture minister has been busily globe-trotting to open up new markets. Farmers also heeded the advice of marketing gurus telling them to forward-contract their grain so they could deliver into the system on a timely basis.

The trouble is, those delivery months have come and gone and federal estimates put between $14 billion and $20 billion worth of grain still sitting in on-farm storage. Creditors are impatient and input suppliers are nervous. This year's carry-out could be triple what is considered normal. So where do they put next year's crop?

Farmers can obtain cash advances through a federal program, and applications this year have set new records, both in the number of farmers requesting them and the number of farmers seeking the maximum of $400,000, of which the first $100,000 is interest-free.

Apparently, no one told Canada's two national railways that moving grain is a priority, even when the Prairie winters turn cold. Canadian Pacific CEO Hunter Harrison openly acknowledged in a national newspaper article that railroads have been focusing on container traffic this winter, because if they didn't move it, they could lose the business. As for grain, well, he said it could move any time.

He's been uncharacteristically quiet since, perhaps on the counsel of others that it would be politically wise for him to simply stop talking.

Then there is the impact on the grain companies, which have been paying demurrage penalties for their inability to load those ships waiting at West Coast ports. But according to some observers, they are also making record profits based on the "basis" -- the difference between country-elevator prices and current market prices.

"Farmers are currently paying $160 per tonne beyond normal freight and handling costs to export their crop," says Richard Gray, an agricultural economist with the University of Saskatchewan. "These record-high basis levels are costing farmers $100 to $200 per acre in forgone revenue and several billion dollars in total."

So it's not just that farmers are seeing their grain sales delayed, they are being paid artificially less for what they do deliver. And that will continue as long as the delivery system remains plugged. It's hard to imagine what the federal government envisioned. But it most certainly wasn't this.

 

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 March 29, 2014 B12

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