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Deregulation Has Led To System Efficiency

Canada’s grain handling and transportation system is more streamlined and the railways more profitable thanks to partial deregulation, Mark Hemmes, president of Quorum Corporation told the Fields on Wheels conference Dec. 2.

In 2000, federal legislation allowed the railways to charge whatever they wanted to move western grain to export so long as total revenues didn’t exceed a cap that gave the railways generous return. The flexibility to lower freight rates to encourage elevator companies to load cars faster and build longer trains has seen the number of elevators drop to 358 at 276 locations from more than 1,000 at 700 places, Hemmes said.

“The numbers are staggering when you think about it with the amount of productivity improvements that we’ve seen in the country elevator system going from about 9,000 tonnes per elevator back in 1980 all the way to almost 100,000 tonnes – a 10 times improvement in the productivity of the country elevator system,” he said. “Phenomenal.”

Thirty years ago, the railways typically hauled two or three cars from an elevator. Ten years ago, 25 per cent of the grain moved in larger car blocks, now 75 per cent does.

The changes haven’t been all positive for farmers though. Hemmes told the Canada Grains Council meeting in Ottawa Nov. 25 Saskatchewan farmers’ average length of grain haul was more than 57 miles, compared to 24 in the 1990s.

Other factors have affected the system, including an increase in special crop and pulse production and canola and a drop in cereal grain production, Hemmes said. The shift in crop choices ref lects a desire among farmers to diversify to reduce risk and to increase their returns.

“Those ( special ) crops will give them far, far better returns than normal cereal crops,” Hemmes said. “We’re talking the difference between $250 a tonne on average and upwards of $500 to $700 a tonne.”

There’s more grain processing now than 10 years ago, including canola, malting barley and even wheat, Hemmes said.

Ten years ago, only one or two per cent of the West’s grain was exported in containers and the rest was bulk. In recent years, 14 to 16 per cent has been exported in containers and the percentage is likely to continue rising, he said.

More container movement, as well as increased shipments of identity-preserved grain will add complexity and reduce the system handling capacity, Hemmes said. The industry needs to be sure the extra returns from containers and IP shipments covers the added cost of handling.

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About the author

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Allan Dawson

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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