With the end of single-desk grain marketing in sight, producers and farm organizations are focusing on filling in the gaps and supporting a stable transition to an open market.
“There are more questions than answers,” said Don Dewar, chairman of an ad hoc Keystone Agricultural Producers committee looking at issues grain producers will face in the open market.
The committee is looking at non-marketing functions once handled by the Canadian Wheat Board, as well as producer cars, the Port of Churchill, country-of-origin concerns, and futures contracts, Dewar told delegates at KAP’s annual general meeting.
“I think we know there is no such thing as a free market, so we know that some of the grain companies are going to exert significant control on how we do business,” said Dewar.
“And the fear is, that without checks in place, it’s possible major grain companies could restrict business operations or producer car shippers or the voluntary wheat board.”
To prevent that outcome, the committee hopes the Competition Bureau will play a role in regulating the industry as changes occur, and it is looking at ways to encourage the bureau’s involvement.
KAP president Doug Chorney spoke to farmers about the future of producer cars, based on his observations as a subcommittee member of the nationwide Crops Logistics Working Group.
Simply having access to producer cars isn’t enough, he stressed.
Marketing arrangements are needed to achieve terminal authorization, and that requires appropriate government regulation, he said.
“Currently the Canadian Grain Commission Order specifies the process of allocating producer cars and that has not changed,” Chorney said. “But it may in the future with the modernization of the Canadian Grains Act.”
The working group aims to identify issues around transportation and make recommendations to the federal government.
According to the wheat board, producer car use was at near-record levels in 2010-11. Prairie farmers loaded 12,784 producer cars, overwhelmingly with board grains, during the crop year.
Most of Western Canada’s 120-plus producer car-loading facilities and 14 short line railways are owned by farmers in co-operatives or joint ventures, but some at the KAP meeting questioned whether they can survive.
Robert McLean, a former KAP vice-president who has been involved with the producer-owned Boundary Trails Railway Company, asked committee members their thoughts on the issue, but also cautioned against pessimism.
“There are going to be both challenges and opportunities,” said McLean, adding legislation is needed to ensure short lines continue to be viable.
The Boundary Trails short line is continuing to evolve and recently bought its first locomotive, he said.
“One of the key competitive disadvantages that I see in my role on the committee, is the multi-car incentive and how that favours high-throughput and inland terminal shipping points,” said Chorney. “The railways, some believe, are artificially building those incentives up.”
He noted the current incentive is roughly $8 a tonne, while in U.S. northern tier states, multi-car incentives run between $25 and $35 a tonne. The result is no cars are shipped from small shipping points.
“My concern is that railways here will potentially raise the incentive,” Chorney said. “We have no way to control that because they are private companies that operate under commercial terms. Our goal, or mandate, is to develop tools and recommendations for government to protect these small shippers.”
Concern over grain contracts and wheat futures were also addressed during the meeting.
A resolution calling for KAP to review grain company contracts passed with overwhelming support. A similar resolution had previously been defeated.
“I’ve heard people say if you don’t like a contract, don’t sign it,” said Reg Dyck, who farms near Starbuck. “But that’s a choice we can’t always make.”
The transition away from the single-desk system will also result in more integration between the Canadian wheat and barley sectors and American grain industries, said Dewar. This could impact the varieties of grain grown in Canada.
“I think it’s important that we try to maintain our reputation, which has been built on our higher-quality Canadian varieties,” he said.
“One of the key competitive disadvantages that I see in my role on the committee, is the multi-car incentive and how that favours high-throughput and inland terminal shipping points.”
“Our goal, or mandate, is to develop tools and recommendations for government to protect these small shippers.”