Is the creation of a new car czar similar to how the Grain Transportation Agency operated two decades ago the way to keep the grain flowing smoothly to export?
Speakers at last week’s grain transportation summit here said someone or something needs to co-ordinate car allocations, especially when demand exceeds supply. Even CN Rail seems to agree more co-ordination is in order.
“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,” CN CEO Claude Mongeau said in a March 31 release.
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Ian McCreary, a farmer, economist and former Canadian Wheat Board director from Bladworth, Sask., told the March 26 summit the Grain Transportation Agency (GTA), is a model worth considering.
Between 1979 and 1995, the GTA set grain-shipping targets by corridor, identified future system bottlenecks, allocated cars to shippers, provided co-ordination of unloads at port and also monitored all those activities.
“It very quickly earned the respect of all the players in the industry,” said McCreary. “Everybody grumbled about the number of cars they got, but there was a level of transparency… and a process where people could feel a part of the planning exercise.”
The federal government wanted a non-biased entity to ensure adequate rail capacity and split up the cars between the wheat board and non-board shippers, McCreary told the meeting, to discuss ways to improve grain transportation.
The GTA was scrapped in 1995, the same year the federal government stopped providing export subsidies on grain. There was grain transportation wreck in 1996-97, probably because co-ordination was gone, McCreary said.
The industry then formed the Car Allocation Policy Group (CAPG) and the wheat board also played a major role in overseeing its grain-shipping program. But one full crop year after the board was scrapped, there is another wreck, he said.
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What’s lacking is an independent third-party co-ordinator that can see the whole system, rather than a piece of it, McCreary said.
“I think we need somebody there to look after our interests and that could be a logistical co-ordinator,” said Cam Goff, a former wheat board director and farmer from Hanley, Sask.
The current car allocation based on grain shippers’ historical shipments isn’t working for stand-alone inland grain terminals and shoreline railway operators, said Perry Pellerin of GNP Consulting Ltd., which works with both.
“We’ll be hard pressed to move what’s sold and we have stopped selling because we’ve got no hope of finishing this off,” he said.
“Something has to change in this system to allow smaller shippers, independent shippers, equal access to cars and capacity. Doing it by percentage is not fair. It just doesn’t work.”
Richard Gray, the University of Saskatchewan agricultural economist who organized the summit, agrees there is no mechanism for equitable allocations when demand for cars exceeds supply.
“Until there’s a snafu first come, first served… works really well. But once you get backlogged the railways really don’t have any mechanism.
“I do think we need some kind of centralized authority,” Gray said. “And having a third party the information can come together without being shared with other companies. Then the third party can make the decision, which is very different than expecting companies to co-operate with each other.”
Markets need information and transparency to work and a co-ordinator helps that, McCreary said.
“I think information in and of itself will be part of the solution because all of the players will make better decisions with better information,” he said.
A co-ordinator will also help ensure small grain shippers get the cars they need to compete.
“Right now we have two railways and if we don’t find a way to solve the problems of the single-point exporters we’re going to have three grain companies,” McCreary said.
