Will Producers Still Be Viable In An Open Market?

Short-line railway companies are asking the federal government what impact the end of the Canadian Wheat Board’s (CWB) single desk will have on the viability of producer cars, producer car-loading facilities and ultimately short-line railways.

Agriculture Minister Gerry Ritz says farmers will still have access to producer cars, but CWB chair Allen Oberg predicts it will be moot since they won’t save farmers money.

“It’s a huge concern to us,” Harold Burkess, president of River Hills Railroad Inc. said in a recent interview. “We’ve been trying to get some clarity from government and the Department of Agriculture. They’ve come up with this announcement but they really have no plan. The way it stands right now it’s going to have a direct impact on the producer car-loading situation.”

River Hills is trying to buy 63 miles of track from Canadian Pacific Railway between Rathwell to Nesbitt for $7 million. River Hills has raised $1.5 million from farmers and has arranged $3 million in private financing and will borrow another $3 million if it can get $2 million in government money.

“We’ve got two things working against us – the wettest spring in history… and now with the uncertainty around the producer car situation guys are unwilling to tie up a bunch of money if they aren’t going to be able to capitalize on it,” he said.

UNCERTAINTY

Producer cars are allocated by the Canadian Grain Commission (CGC) and are enshrined in the Canada Grains Act, Ritz said in an email last week.

“The CWB monopoly has no bearing on access to producer cars and our government will continue to protect producers’ access to them,” he wrote.

Farmers will still have access to producer cars after the federal government launches an open market for western wheat and barley Aug. 1, 2012, but the $1,000-a-car saving will disappear, Oberg predicted.

Now the CWB is the grain shipper of CWB grain and can direct producer cars to the export terminal of its choice, allowing farmers to bypass country elevators avoiding handling and elevation charges, he said. In an open market the CWB will be a port buyer.

Last crop year 97 per cent of the 12,198 producer cars shipped contained wheat board grain, according to CGC records.

“In an open market all you have is the basis, there is no stated elevation and handling,” Oberg said. “There is no economic benefit to do it that’s why so few get shipped.”

Oberg said he has shipped canola in producer cars to support his local short-line railway near Forestberg, Alta., but could’ve earned more delivering to an elevator 25 miles away.

Grain companies have huge investments in both country elevators and want to maximize their use to lower their fixed per-tonne operating costs, Oberg said.

EFFECT ON CHURCHILL

That’s also why little grain will be exported through Churchill after the CWB loses its single desk, even though doing so saves $30 a tonne in freight costs to markets like Europe and North Africa, he said.

“I know when I was a director with Alberta Wheat Pool we wanted to maximize throughput for our own facilities,” he said. “That was No. 1.”

It’s also why the major grain companies push as much grain through their Vancouver terminals, even when the port is congested, rather than through the Prince Rupert terminal, which is owned jointly by the companies.

“Without the wheat board I don’t really see a viable solution for Churchill,” Oberg said.

Kevin Friesen, president of the Boundary Trails Railway Company (BTRC) is more sanguine.

“The flow of grain isn’t going to change no matter what happens here,” he said.

FLOW OF GRAIN

The BTRC, which operates 25 miles of track between Manitou and Morden, ships producer cars to Mission Terminals and West Central Road and Rail – both agents of the CWB.

“I hope the government doesn’t totally forget about us because if they do get rid of the wheat board they could kill more than our wheat industry, they could kill short-line rail, they could kill the grain commission,” Friesen said. “We just want to make sure they’re thinking it all the way through. I’m sure they will.

“It sounds like the board is going to remain as a viable option so perhaps short-lines will be their key way of moving grain and it will make producer cars stronger than ever. I don’t know, it’s hard to tell what exactly will happen.”

The BTRC has shipped canola to Cargill and ADM via producer cars and will ship 40 cars of oats to Quaker Oats in the United States next month. [email protected]

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TheCWBmonopolyhasnobearingonaccess toproducercarsandourgovernmentwill continuetoprotectproducers’accesstothem.”

– GERRY RITZ

About the author

Reporter

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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