I have a new understanding of the term “orderly marketing.”
I once thought of it simply as the approach the now defunct single-desk Canadian Wheat Board took to selling western Canadian wheat and barley. You know — pricing to market, not flooding markets to avoid driving prices down and providing equitable delivery opportunity for farmers.
It turns out orderly marketing was also about co-ordinating grain movement through Canada’s constrained grain-handling and transportation system.
I knew the wheat board played a vital role in grain logistics — a role missing this crop year given the historic backlog in grain movement.
Even CN Rail president and CEO Claude Mongeau thinks so. “One of the biggest root causes of the challenge we face is a lack of co-ordination across the supply chain and growing pains from new grain-marketing strategies following the change in role of the Canadian Wheat Board,” he said in a March 31 news release.
It’s also why some, including former wheat board director Ian McCreary, suggest a new grain transportation co-ordinating entity is needed.
It makes sense. Grain companies say they haven’t oversold the system’s shipping capacity, but how do they know? Each shipper knows what it sold, but not their competitors’ sales.
And how do shippers, including producer car users, know the railways are allocating cars fairly?
How can a system-wide level of service be judged adequate or not when aggregate shipping targets are never established?
Agriculture and transport ministers, Gerry Ritz and Lisa Raitt reject the idea, saying market forces should be allowed to work, even though a lack of them is what drove the federal government to introduce the Fair Rail for Grain Farmers Act.
To be sure, Ritz also opposes recreating the Grain Transportation Agency (GTA), which operated from 1979 until 1995, because doing so would be an admission that killing the wheat board without replacing some of what it did was a mistake.
CN Rail acknowledges the lack of system co-ordination but like the ministers, opposes more regulation.
“We steadfastly believe that ensuring commercial alignment and encouraging supply chain collaboration are much better ways to build a stronger transportation infrastructure to the benefit of Canadian farmers,” says CN spokesman Mark Hallman.
From the Grainews website: CWB building grain elevator east of Saskatoon
Open markets work best when unfettered, or in others words, are unconstrained. Western Canada’s grain-handling and transportation system is constrained, especially this year.
According to University of Saskatchewan agricultural economist Richard Gray most of the West’s grain wants to move to the West Coast where prices are highest. But West Coast terminals can only handle 22 million tonnes, or two-thirds of normal exports.
There’s an open market for grain marketing, but not in grain transportation. The two railways enjoy geographic monopolies. According to the grain companies the railways refuse to invest in surge capacity because they don’t have to. Grain is captive to rail because of the long distances to port.
The grain companies say the solution is forcing the railways into service-level agreements with individual shippers and penalizing the railways when they fail to provide that service.
They are probably right. But will such agreements ever be implemented?
It makes sense to explore a new federally mandated GTA to oversee and direct grain transportation, and if warranted, set it up.
Quorum, the firm that already monitors the grain handling and transportation, could be contracted to do the job. Coincidently, one of its staff worked for the old GTA.
If service-level agreements come to be and work, the new GTA would become redundant and could be abolished — again.
But if those agreements don’t come, or don’t work, then the new GTA is ‘plan B.’
Peter Thomson, the head of the old GTA was fond of saying, “A little bit of competition can do away with a hell of a lot of regulation.” Nineteen years after the first GTA was scrapped competition between the railways is as elusive as ever, while the grain-handling system is even more constrained in the wake of higher grain production.
It seems the more things change, the more they stay the same.