Farmers Reap $35 Million In Transportation Savings

STAFF / The Canadian Wheat Board says it saved western Canadian farmers $35 million in grain transportation during the previous crop year, through programs designed to reduce producers costs for moving their grain to port.

Farmers bear all the costs of grain transportation, so the CWB is constantly looking for ways to keep those costs down, said Bill Woods, a CWB farmer-elected director from Eston, Saskatchewan. We are the largest shipper in Western Canada. This gives us negotiating power with grain handlers and railways.

Eighty per cent of western Canadian wheat is exported overseas and farmers in the centre of the Prairies face the longest shipping distances of any producers in the world. So transportation is the single largest marketing cost.

Every year, 17 million to 20 million tonnes of wheat, worth between $5 billion and $8 billion, is shipped to Canadian ports and markets dwarfing export volumes of all other agricultural commodities.

Because farmers ultimately bear the transportation costs, Woods said they have a far greater stake in keeping those costs low than other players in the grain industry, who can simply pass their costs along to farmers as the purchasers of their handling and freight services.

He said the CWB negotiates volume-and performance-related agreements with grain companies, railways and port terminal owners, keeping additional money in farmers revenue pool. It also issues tenders for grain exports through the ports at Thunder Bay, Churchill, Vancouver and Prince Rupert. Grain companies bid on the right to deliver a given quality and quantity of grain to a specific port. Tender revenue is distributed to famers through the pool accounts.

Transportation savings for the 2010-11 crop year were in line with the five-year average of $35.2 million. In addition to these annual savings, farmers also save between $8 million and $12 million a year through the CWB s use of the Port of Churchill, which avoids the extra costs of the Great Lakes-St. Lawrence Seaway system.

Woods said farmers are unlikely to achieve these benefits in an open-market system, which would shift the focus from cost savings for farmers to maximizing corporate margins.

There is little incentive for grain companies or railways to offer these kinds of programs. The business case from their perspective is difficult to see. For the CWB, it makes complete sense because it helps us maximize farmer returns.

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