Heavy rains cause backlog | Boats cannot be loaded during rain, hefty demurrage fees mounting
Heavy rain has bogged down vessel loading at Canada’s top grain exporting port, which industry executives say could affect grain flow and prices.
Vancouver is always rainy in the winter, but this year has been exceptionally wet. The soggy weather has caused long delays in vessel loading and a backlog of ships.
Quinton Stewart, a pulse trader with Viterra, said the excessive rain is having a significant impact on export programs.
“When it rains in Vancouver, essentially you cannot load any vessels,” he told producers during a market outlook presentation at the pulse portion of Crop Production Week.
“You go from loading roughly 10,000 tonnes per day to zero to 1,000 tonnes.”
Stewart said that has put a damper on the pace of sales out of a port that does more grain business than any port in the country.
“What (the rain) has resulted in is a large amount of vessels in Vancouver piling up. If you make a trip out there, you’ll see 20 to 30 vessels bobbing up and down in the harbour there,” he said.
“We’ve seen things grind to a halt for many of our export programs.”
Vancouver received 197 millimetres of rain in October, up from the previous five-year average of 115 mm. November precipitation was normal but December was again wet with 220 mm of rain compared to the previous five year average of 148 mm for that month.
Bruce Burnett, CWB’s director of weather and market analysis, said boats can’t be loaded during rain because the additional moisture puts shipments out of spec.
Loading delays vary by company, but he has heard of some vessels that have been waiting for a month in port, resulting in hefty demurrage fees. The harbour is so full that some ships are anchoring in Nanaimo, B.C.
Burnett said there are two implications for growers.
“If you had a delivery contract for January and suddenly you’re delivering in February, that’s probably going to be the reason why,” he said.
The delays could also have direct financial implications for farmers.
“It could impact basis levels a bit out in the countryside,” he said.
Nearby cash bids could be softening for crops destined for the West Coast.
Crops sold into the U.S. marketplace or those that move through East Coast ports shouldn’t be affected.
It will also depend on which grain company farmers deal with. For instance, grain is flowing pretty smoothly at Alliance Grain Terminal Ltd.
“There have been delays and some companies are being affected more than others,” Alliance chief executive officer Dave Kushnier said in an email.
“We are not in a terrible situation at our terminal, but I understand some are.”
North West Terminal in Unity, Sask., is one of many companies that use the Alliance terminal to ship product.
“What our group is finding is that I think things are running relatively smoothly. We might be one or two ships behind, but we don’t have a big backlog at this point,” said North West chief executive officer Jason Skinner.
“We’ve been managing our sales to ensure that we’re not overbooking our capacity.”
The shift to an open market for wheat and barley could be a contributing factor to the delays.
There are reports that grain ships are being partially loaded and then sent to anchor for up to a month before getting fully loaded, something that rarely happened when CWB’s monopoly was intact.
Burnett said it is too early into the open market and there is not enough data to confirm whether that is indeed happening. However, he acknowledged it is plausible.
“I can see where the argument base is, and it does have some logic,” he said.
Under the monopoly, CWB had access to wheat from all terminals at the port. If there wasn’t enough wheat to fill a vessel at one terminal, it could send the boat to the next one as long as the economics were right.
That will be harder to accomplish under the open market unless companies have agreements in place to borrow grain from one another.
Burnett said there is also an argument to be made that grain transportation is more efficient under the open market because companies control the grain from origin to terminal without any middlemen.
At the end of the day, it all boils down to how companies are managing their sales programs and supply lines, he said.