Big grain backlog | Costs keep rising for producers
There are hundreds of stories to describe the transportation backlog that’s affecting western Canadian farmers this winter.
And in most of those stories, there is one recurring theme: record agricultural production combined with rising demand for rail service and insufficient capacity is costing growers dearly.
Lost sales, huge basis levels and mounting demurrage costs — estimated at more than $25 million — have taken a huge chunk out of farmers’ wallets.
And the costs are rising daily.
Not surprisingly, the chorus of unhappy farmers demanding immediate solutions is growing louder and more urgent.
Jack Shymko is one prairie producer caught in a grain transportation system that is unable to meet shippers’ needs.
On his farm near Ituna, Sask., about 160 kilometres northeast of Regina, Shymko has yet to deliver a single bushel of last year’s record-breaking crop.
Every tonne of his production has been contracted but so far, not a single bushel has been delivered.
“I’ve contracted everything, other than canola, but I haven’t moved a thing,” said Shymko.
“On this line, there’s not too much of anything moving, other than oil cars. There’s just no movement.”
After a decent start to the 2013-14 crop year, grain movement through line companies has been slow this year.
Trains are moving in the Ituna area. They’re just not moving grain, at least not enough of it.
Shymko, a long-time oat producer, has been watching with dismay as American millers, unable to source Canadian oats, are looking to Europe, where reliable supplies can be secured more easily.
Cash prices for oats, at least at U.S. mills, are higher than ever but Shymko and others can’t get their product through.
In a normal year, Shymko loads oats on a handful of producer cars at a leased facility near Kelliher, Sask., about 20 km away.
This year, that option has also been taken away.
Producer cars ordered in October still haven’t been spotted.
All told, Shymko has 10 unfilled orders for hopper cars. It remains to be seen when they will arrive, or even if they will arrive at all.
“Usually I’m about the only guy around here who loads producer cars, but this year there’s a whole whack of guys.
“But so far, nothing.”
The situation facing prairie farmers this winter varies from region to region.
In Alberta, some grain farmers have done relatively well, says Irma farmer Kent Erickson.
In his area, those who contracted aggressively and took advantage of early delivery opportunities are in decent shape.
Nonetheless, there is little question that the grain handling system is straining under the huge burden of last year’s record crop.
According to Erickson, one obvious solution is to get liquid cargo such as oil off the rail system and into pipelines.
Elsewhere, disgruntled producers are pointing to the removal of the single-desk grain marketing system as a key factor contributing to this year’s supply chain bottleneck.
Under the single desk, grain delivery opportunities were at least divided equitably between all farmer, they say.
Others say the loss of single-desk marketing is irrelevant.
“It’s preposterous to suggest that the move to marketing freedom is the cause of this year’s shipping problems,” said Levi Wood, president of the Western Canadian Wheat Growers Association.
“In the first year of an open market, our wheat and barley moved to market without a hitch. The problems being experienced in this second year are instead related to the failure of the railways to provide adequate shipping capacity to move this year’s crop.”
At Cutknife, Sask., grain grower Larry Millhouse said railway service might be inadequate but railway companies don’t deserve all of the blame.
To some degree, farmers who didn’t contract aggressively enough sealed their own fate.
“Sure, there’s probably some issues with rail cars and a few hangups here and there … but how can I argue with rail performance?” said Millhouse. “We’re hauling today and we’re hauling all next week …. All the crop that I grew is going to be off the farm by the end of March.”
Millhouse said rail companies are a convenient scapegoat but they aren’t the only ones fuelling farmers’ frustration.
Grain companies are also turning the screws to farmers with widening basis levels, he said.
“The rail companies might need a kick in the ass but the grain companies probably need a kick in the ass too,” Millhouse said.