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Analysis: Canada needs Churchill, but do grain farmers?

The port and bay line are vital to the northern economy, but so little grain moves the impact on the grain sector would be minimal

Canada’s grain industry doesn’t need the Port of Churchill, or its railway — but Canada does.

Both are important to Canadian sovereignty in the North and are vital to the economies of Churchill and other northern communities.

From a farmer’s perspective the more shipping options available the better. But if Churchill — Canada’s only northern deepwater port — ceases to export grain it won’t have much impact on the grain business because the volumes are so low.

Last calendar year just 186,000 tonnes of grain were exported from Churchill by OmniTrax, the American company that in 1997 bought the port and rail line that runs 810 miles from The Pas.

In the 2014-15 crop year, ending July 31, 2015, Churchill exported 472,000 tonnes of grain. The Port of Thunder Bay, which is where most of that grain would move otherwise, handled 8.2 million tonnes. Bottom line: Thunder Bay could’ve handled all Churchill’s traffic in just two weeks.

The West moved 37.86 million tonnes of grain. Churchill saw just one per cent of it. Moreover, those exports were subsidized.

Still, many farmers have a soft spot for Churchill and rightly so. Traditionally, Churchill, which is closer to some European, African and South American markets than Thunder Bay, has given grain farmers a freight advantage of up to $30 a tonne. But the ability to capture those savings disappeared Aug. 1, 2012, when the previous federal government ended the Canadian Wheat Board’s monopoly.

Economic theory holds savings will be captured by grain companies and OmniTrax because farmers in the Churchill catchment area don’t have cheaper alternatives to force companies to share the benefits.

Cheap ocean freight has also eroded Churchill’s advantage. More ‘salties’ (smaller ocean-going ships that can navigate the St. Lawrence Seaway’s locks) are coming to Thunder Bay, reducing the handling costs associated with moving grain via lakers to the lower St. Lawrence where it is unloaded, only to be loaded later on larger ocean-going ships. The double handle costs money.

Wheat board supporters predicted Churchill’s demise, but it didn’t take great insight. Grain companies — even the farmer-owned pools — repeatedly said they preferred to ship grain through their own terminals. It makes sense to maximize your own assets and capture the value earned from grain blending and screenings.

Before OmniTrax bought the 140,000-tonne-capacity Churchill terminal, it was owned by the federal government. The wheat board told grain companies where to deliver board grain.

OmniTrax lacks a country elevator system to feed its northern facility and grain companies aren’t excited about the prospect of feeding it.

“Of course we want to ship as much into our own terminals as we can,” Richardson International spokeswoman Tracey Shelton said in an interview July 28.

“We want to use our facilities that we are investing money into and we are continuously upgrading. And certainly Churchill does have some disadvantages.”

The list of disadvantages is long:

  • The port has a short, three-month season, due to ice. The wheat board held grain back filling Churchill in late winter giving the port a running start when its season began in August.
  • The terminal, opened in 1931, is old, but has had some upgrades.
  • The rail line to Churchill, built on shifting permafrost, is in poor shape. Sometimes trains can only travel nine m.p.h. Derailments and delays are common.

“We just completed a massive expansion (of our terminal) in Vancouver where we nearly doubled storage capacity,” Shelton added.

“We are putting through grain and setting records for unload and loading times and really turning the facility many, many, many times a year.”

Their 170,000-tonne terminal moves five million tonnes of grain a year and Richardson expects to crank it up to six million.

The Port of Churchill has never had it easy. Getting it built was a struggle. The Canadian Northern Railway started to lay track from Winnipeg to Hudson Bay Junction in 1908, but declined to go north, despite federal government aid. With more government funds the next year, the railway headed to Nelson, which is farther south than Churchill, but work ceased during the First World War.

When construction resumed it was decided to go north to Churchill where the water was deeper. The Hudson Bay line was completed in September 1929 at a cost of $45 million, but it wasn’t until 1931 that the grain terminal began operating.

When the news broke last week that the port, which is up for sale with the railway, wouldn’t ship grain this year, a lot of people were surprised given it’s easier to sell a “going concern.” It looked like a tactic to pressure governments. Manitoba Premier Brian Pallister later confirmed that it was.

Governments have already spent $130 million on the port and railway and Pallister said July 28 he wouldn’t give in to a private, American company seeking more bailouts.

The Port of Churchill and the railway are much more than the sum of their parts. They account for an estimated $40 million in economic activity. It’s unthinkable that the Manitoba and federal governments would abandon the line. And without the 70 or so direct jobs the grain terminal provides, employing about 10 per cent of the town’s population, some question Churchill’s viability.

Sinclair Harrison, the former president of the Hudson Bay Route Association, which has lobbied for the northern port longer than it has existed, believes Churchill can succeed if it handles a million tonnes of grain a year. Climate change is already making the shipping season longer, but also makes the rail bed less stable.

Former prime minister Stephen Harper pledged to establish an Arctic naval port. Prime Minister Justin Trudeau should consider building it in Churchill. It would be a better use of government money than subsidizing grain exports from a port grain companies don’t want to use.

About the author

Reporter

Allan Dawson is a reporter with the Manitoba Co-operator based near Miami, Man. Covering agriculture since 1980, Dawson has spent most of his career with the Co-operator except for several years with Farmers’ Independent Weekly and before that a Morden-Winkler area radio station.

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