Grain Farmers Paying the Price for Post-Single Desk Logistics Failure
(February 5, 2014, Saskatoon) -Farmers should not expect prices to go up, or more grain to be moved, anytime soon, as Agriculture Minister Gerry Ritz is only calling for more numbers, reports and discussions among railways, elevator companies and grain companies while farmers’ costs mount and prices tank as a result of Canada’s wrecked grain transportation system. “More people taking notes will do nothing to make up for the lack of an authority to co-ordinate the shipment of grain by rail to ports,” said NFU board member and Saskatchewan grain farmer, Glenn Tait. “This is a service the CWB used to provide for the benefit of farmers.”
As the largest shipper of grain in Canada, the farmer-controlled CWB was able to coordinate grain shipments by rail according to customer demand, elevator and terminal capacity, and shipping requirements. Now that the private trade is controlling the export system, there has been a backlog of 30 or more vessels waiting at anchor since before Christmas. Ships often must shuttle in and out of terminal berths to load partial cargos, with each ship charging in the neighbourhood of $10,000 per day in demurrage fees to cover the wages, fuel, food and the cost of being idle when they could be shipping other valuable products. Tait stated, “As a result of the disorganization at the port, rail cars are being used as storage, not for transportation and farmers are paying the cost.”
“The elevator companies will recoup demurrage charges from farmers by deducting this cost from grain prices. When the CWB looked after logistical matters, freight costs from the prairies to western ports were in the $50 per tonne range. Today, we are seeing costs of $100 per tonne or more deducted,” Tait continued. “The total losses from demurrage alone so far are in the millions of dollars – money that will never be spent by prairie farmers, or anywhere within the Canadian economy.”
The base price of wheat has fallen to around $4.00 a bushel from over $7.00 a year ago – for the same quality of product. This 40% nominal drop in grain prices is understated and has been masked by an almost 10% decline in the value of the Canadian dollar in the past year. In some areas, elevators are not even taking delivery – an effective price of zero.
“Many farmers who have contracts are unable to ship grain through no fault of their own – yet they are the ones paying the late delivery charges,” said Jan Slomp, NFU President. “The price gap between what farmers get at the country elevator and what grain companies get when they sell the grain is widening. The railways, elevators and shipping companies are pocketing the difference, in the millions of dollars.”
“The farmer-controlled CWB worked with industry and government to co-ordinate and promote trade and transportation. It won important victories on behalf of farmers for better rail service and better rail rates,” said Ken Larsen, NFU member and Alberta grain farmer. “Blaming the railways or grain handlers is like blaming coyotes for eating mice. By ending the CWB’s single desk authority, it was Ritz that turned the coyotes loose.”
“Will farmers have to cap production at 75% of this year's yield because that is all the private trade is capable of moving through ports in any given year? Investing in improved genetics and agronomics or creating fake markets by signing new trade deals will do nothing to solve the logistical problems of moving our grain to the ocean efficiently,” observed Tait.
“The current disastrous state of grain transportation is just another example of government bungling that lets corporations extract more money from farmers,” Slomp concluded. “We know that without oversight there will be a bottleneck every year. Millions of tonnes of grain are harvested every fall and must be moved to market. We need a coordinating authority that has the teeth to discipline the grain transportation system. Otherwise we risk losing Canada’s capacity to be anything other than a third-rate supplier of last resort.”
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For more information:
Jan Slomp, NFU President: (403)843-2068 or (403)704-4364 (cell)
Glenn Tait, NFU Region 6 (Saskatchewan) Board Member: (306)481-4449 (cell) or (306)892-4342
Ken Larsen, NFU Region 7 (Alberta) Member: (403)746-5792
