Mounting frustration over the languid pace of shipments through western Canadian grain elevators has prompted more prairie grain farmers to look elsewhere for delivery opportunities, including producer car loading sites.
Canadian Grain Commission statistics show producer car shipments through the first five months of the 2013-14 crop year are up sharply from 2012-13.
As of early January, more than 5,250 producer cars have been shipped this crop year, up 35 percent from the 3,900 cars shipped in the same period a year earlier.
Producer car shipments of wheat, durum, oats, barley and flaxseed are all higher, although oats, barley and flax have seen the largest gains.
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The number of producer cars carrying Canadian oats to market in the first five months has soared to nearly 1,100, up 162 percent from the same period last year.
Barley cars have also more than doubled to 183. Flax cars are up from eight last year to 41 this year.
The statistics also show a significant increase in producer cars moving prairie grain to domestic and American end users as opposed to Canadian export terminals.
Producer cars hauling wheat, durum, barley and oats to destinations other than export terminals at Thunder Bay, Vancouver, Prince Rupert and Churchill have more than tripled, jumping to more than 2,000 cars from 659 cars in the first five months of 2012-13.
“Based on the numbers … it’s apparent that there’s a market (for Canadian grain) in the U.S. … and in other non-terminal locations, and producers and buyers are simply taking advantage of that situation,” said grain commission spokesperson Remi Gosselin.
“Buyers of Canadian grain have realized that producer cars are another conveyance option for producers,” he said.
The increased interest in producer cars stems from logistical constraints hampering grain movements through traditional channels, which has been slower than normal this year, particularly for smaller volume crops such as oats, barley and flax.
As a result, much of that business has been taken up by grain producers and short-line rail companies seeking new grain marketing opportunities.
A further incentive is the huge spread between grain prices offered by Canadian line companies and those offered by North American end users, many of whom are struggling to obtain Canadian grain.
Despite a big increase in producer car use, prairie oat growers are still shut out of lucrative U.S. milling markets because the transportation system is not offering adequate capacity.
“One of the different challenges that we have, compared to say other crops in Western Canada is that 90 percent of our exports go to the U.S.,” said Shawna Mathieson, executive director of the Prairie Oat Growers Association (POGA).
“We’re being told by almost every miller that we have in the U.S. that they are empty.”
Mathieson said U.S. millers, which are already running at reduced capacity, are beginning to import oats from northern Europe, now a more reliable source than deliveries from Canadian destinations less than 1,000 kilometres away.
Meanwhile, freight costs for a single grain hopper car out of Northgate, North Dakota, near the Canada-U.S. border are $1,600 higher this year than they were 12 months ago.
“Going into the U.S., we’re told that there’s even a bigger delay in getting those (hopper) cars back, so railways just simply don’t want to do it,” Mathieson said.
“This is a real concern for us, and if we can’t get it fixed, there’s no reason why (U.S. millers) wouldn’t try to secure their oats from other countries for the long-term because they need a constant supply…. You can’t make Cheerios from barley.”
Many Saskatchewan shippers who have requested producer cars have been waiting for weeks for them to be spotted.
The number of hopper cars spotted at Torch River Rail, a short-line rail company based at Choiceland, Sask., is well below the number that it ordered.
“We’re probably two months behind … 300 cars probably,” said railway chair Ron Shymanski.
“About 80 or 90 percent of what we normally move is oats, but this year everything’s behind. We’ve got wheat cars ready to go, we’ve got barley ready to go, some peas. Everything’s behind.”
Growers in the Choiceland area normally depend on U.S. millers to buy significant quantities of oats.
But this year, those buyers are looking elsewhere.
“Quaker has cut off their bids,” said Shymanski.
“They’re not bidding on oats because of the transportation problems.”
Shymanski said U.S. prices for milling oats are the highest in years, with cash bids nearing $5 a bushel.
“The nearby months are a tremendous price, but you can’t get anything there,” Shymanski said.
Meanwhile, concerns over transportation constraints and the resulting market damage are growing louder.
Earlier this month, the government of Japan announced it would start buying more American wheat over Canadian wheat.
Japanese officials said rail backlogs have resulted in late deliveries of Canadian wheat two months in a row, leaving Japanese mills short on grain.
