Major grain handlers happy with transition to open market

CORRECTION – August 6. 2013 – This story originally referred to Kyle Jeworski as Viterra’s vice-president and chief executive officer for North America. Jeworski’s title is actually president and chief executive officer for North America.

A top executive with Canada’s largest grain handling company says the industry has adjusted well to operating in a deregulated market.

However, there are still important issues to watch, including regulatory costs related to the Canadian Grain Commission and the impact of federal rail legislation.

“From our perspective, things went about as well as we could have expected or hoped,” said Jean Marc Ruest, vice-president of corporate affairs with Richardson International.

“I think there are probably two areas that we have to keep our eye on going forward,” he added.

“The first is on the regulatory side of things.”

He said operational changes at the grain commission have resulted in significantly higher handling costs for the industry.

Beginning Aug. 1, the commission will derive more revenue through user fees and less from the federal treasury.

It is estimated that the Canadian grain industry, including farmers, will pay an additional $17 million for CGC services in the 2013-14 crop year.

User fee revenues are projected to rise to more than $54 million, up from $37 million.

The new fees are expected to cover 91 percent of the commission’s annual budget once the changes are fully implemented, while government will contribute nine percent, or $5.5 million.

In previous years, Ottawa’s contribution has been closer to 50 percent.

Ruest said regulatory costs must be kept in check to ensure the Canadian grain industry remains competitive.

“The cost of the CGC to the system is very high,” he said.

“If we really want to be competitive as an industry on a worldwide basis and our costs on the regulatory side are out of line with what’s being charged in other jurisdictions, that’s a problem for us.”

On rail costs and level of service agreements, Ruest said the impact of recent legislative changes remains to be seen.

“I think the (grain) industry has made its thoughts known on whether they think those changes are sufficient or not,” he said.

“I think that’s an area that we will still have to be mindful of.”

Kyle Jeworski, Viterra’s president and chief executive officer for North America, agreed that the transition to an open market has been smooth.

“I would say things have gone as expected,” Jeworksi said.

The changes have resulted in more efficient use of Viterra’s grain handling assets and improved price signals to farmers.

“We’ve had positive feedback from farmer customers and end-use customers,” Jeworski said, adding that Viterra will continue to invest in its network to ensure modern, efficient facilities across the West.

Jeworski said deregulation allowed the Canadian industry to respond quickly to strong U.S. market demand in the post harvest period.

“Right after deregulation, we did see a significant amount of red winter and red spring wheat moving into the U.S. early on to fill some of the deficit (there),” he said.

“With deregulation, that really allowed the whole industry to be responsive to a specific need.”

Viterra is selling wheat to overseas customers that were not traditional buyers of Canadian wheat under the single desk system, he added.

It suggests that the deregulated industry is expanding markets for Canadian grain.

Jeworski refuted suggestions that promotion and market development efforts have suffered in the new environment.

“CWB has been promoting Canadian grain for a long period of time, but now you’ve got a number of internationally recognized institutions, such as CIGI (Canadian International Grains Institute) that are doing a lot of good work … and you’ve got a lot of companies (as well),” he said

“I don’t think anything has been lost. In fact, I think the industry is doing a good job of working with end-use customers in identifying their needs.”

Market acceptance of minor classes of Canadian wheat, such as Canada Prairie Spring, is increasing, he added.

2 Responses

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  1. Dean Harder on

    It shouldn’t surprise anyone that industry would say things are going well from their end. Secondly the fact the ‘industry’ is doing so well should deeply concern farmers. Why won’t industry compensate for the loss of the protein premiums?
    The inklings that farmers will be taking the hit for the CGC changes and that ‘industry’ is very clear that they will offshoot the price to them is also a disturbing corporate trend. It means that ‘industry’ wants to continue on the path of deregulation so that farmers will know even less about what’s going on with their grain as it comes to port. Farmers who have been brainwashed over the years to think that ‘industry’ has farmers best interests in mind need to wake up.

  2. It is nice the major grain handlers are happy, just wondering about Producers and smaller handlers? As Dean mentions above, what is happening at Port?

    If the major grain handlers are passing on CGC costs to Producers, why are they so hell bent on getting rid of the CGC?

    “The cost of the CGC to the system is very high,” he said.
    What is the cost to the system without the CGC? What is the cost to the system after the recent changes to the CGC?

    As mentioned, only time will tell what the costs are moving from the grain act of decades past to the changes of post Aug 1st and the possibility of more deregulation in the future. Does Canada benefit from all these changes?

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