Grain monitor disagrees | Rail capacity and unloads are to blame for backlog
The West Coast needs more terminal capacity, says an agricultural economist.
Richard Gray, a professor in the University of Saskatchewan’s bioresource policy, business and economics department, said the West Coast is by far the cheapest route to Pacific markets, which are the growth markets for grain.
Demand for grain in Atlantic markets is dwindling and competition is increasing from Black Sea and South American exports.
“If we’re going to produce more grain in Western Canada, it should go west,” he said in an interview following his presentation at the recent Grain Handling and Transportation Summit.
“Shipping grain through Montreal (through) a very long way to sea into a depressed market doesn’t make any sense.”
West coast crop movement has never exceeded 22 million tonnes a year, but Gray believes the grain handling and transportation sectors need to gear up to ship 36 to 40 million tonnes west as production grows along with demand in Pacific markets.
Gray said the West Coast is obviously the most economical way to reach China and Japan, but it is also the cheapest way to reach markets in Europe for anywhere west of Brandon.
He said expanding west coast capacity would likely save farmers $800 million in transportation costs and $3 billion in basis every year.
Gray believes terminal capacity needs to be expanded to 49 million tonnes from 36 million tonnes and the simplest way to do that is to improve throughput at existing terminals.
Other proposals would be more complicated.
“I think we need to talk about the forced sale of Prince Rupert, as the facility has a history of being underutilized,” said Gray.
Viterra, Richardson and Cargill jointly own the terminal at Prince Rupert Port. He said grain companies prefer to use their wholly owned terminals in Vancouver rather than the Prince Rupert facility.
Gray said there is room for new terminal capacity in Prince Rupert, Roberts Bank and perhaps Kitimat.
Mark Hemmes, president of Quorum Corp., Canada’s grain monitor, isn’t convinced west coast terminal capacity is the problem.
“There’s lots of capacity there right now,” he said.
He said the West Coast has 30.2 million tonnes of terminal capacity, which is more than enough to handle the 21 to 22 million tonnes of grain that moves west in most years.
The forecast for the next four or five years calls for 25 to 26 million tonnes of western grain movement.
“I’m not sure that in the near to mid-term we have to worry about capacity at the port terminal level,” said Hemmes.
What needs to be addressed is rail car unloads and rail capacity. Grain arrives at the port in fits and starts, which causes logistical headaches.
He said there is plenty of capacity to handle the western Canadian crop when railways and terminals are working in unison.
“You’d be surprised at how much stuff they can put through there,” said Hemmes.
He recalled a 12-week period in 2009 when west coast rail car unloads exceeded 5,000 cars each week.
“It was phenomenal the volume that they were driving through there,” said Hemmes.
“It can be done. It really can be done. I have no doubt in my mind.”
West coast rail car unloads in 2013-14 have averaged 4,000 cars per week, but it jumped to 6,176 in Week 32 because of federal legislation requiring better railway performance.
Hemmes said existing terminals are investing in improvements.
Richardson is putting in 120,000 tonnes of new storage, Viterra and Richardson have improved unloading capabilities, Alliance Grain Terminal wants to increase ship-loading throughput and all terminals are working on improving throughput inside the terminals.