Open market poses challenges for independents

Relationships important | With less CWB grain volume, alliances with large grain handlers are key to success

The elimination of single desk marketing for wheat, durum and malting barley is not expected to significantly affect the amount of grain delivered to farmer-owned grain terminals in Western Canada.

However, members of the Inland Terminals Association of Canada say the learning curve has been steep for farmer owned terminals operating in the new marketing environment.

“It’s been an interesting time for all of us, to say the least,” said Shawn Graham, general manger of the Gardiner Dam Terminal Joint Venture at Strongfield, Sask.

“Obviously, the transition from the wheat board to the CWB open market … and balancing the two types of business back and forth has been an interesting time for all of us.”

Chad Campbell, chief executive officer of Prairie West Terminal at Plenty, Sask., also cites challenges.

“With the exit of the CWB single desk monopoly … we’ve seen some monumental changes to our business, in terms of grain handling, grading, marketing, accounting, rail car logistics and car allocations, and that’s just the tip of the iceberg.….”

CWB grain is expected to account for a smaller percentage of grain delivered to farmer-owned terminals under the new marketing environment.

With fewer tonnes assured through the CWB and more exported by the private sector, ITAC members say it will be more critical than ever to build and maintain relationships with large grain handling companies and exporters.

“Building those relationships is going to be the key to success,” said Terence Koshman, marketing manager with the Lethbridge Inland Terminal.

“We found out very quickly on Aug. 1 that it doesn’t matter how big our facilities are, you can’t do it alone.”

Ninety percent of grain previously handled by the Lethbridge terminal was CWB grain, Koshman said.

This year, all bets are off.

Wayne Hittel, chair of the Great Sandhills Terminal at Leader, Sask., said it remains to be seen how overall volumes at ITAC terminals will be affected.

However, based on early indications, total volumes should not vary significantly from past years.

According to its website, ITAC’s members handle 2.5 million tonnes of grain, oilseeds and pulse crops a year and control grain handling assets with a replacement value of $370 million.

“I think we’re like the rest of the industry,” said Hittel, who also serves as chair of Great Sandhills Terminal.

“We’re getting our feet wet and we’ve definitely formed some alliances with each other and with bigger groups to make sure that we continue to have access to the world, not just through the CWB but with (others as well).”

Hittel said deliveries at some ITAC terminals started out slowly but picked up in September and October.

“Deliveries off the start were a bit slow because farmers weren’t sure (about the new market) and some terminals weren’t sure what to take into their facilities,” he said.

“In the old days, if you took a little bit of (grain and didn’t move it immediately), you’d get storage for it and it wasn’t that big of an issue because you’d still be getting some revenue.… Now you can’t do that. It’s the age of in-the-door and out-the-door, so you go at it a bit more cautiously.”

Although the proof will be in the pudding, Hittel said ITAC members are cautiously optimistic about overall tonnage in 2012-13.

“I wouldn’t say (volumes are likely to) increase, but I would hope that we’re going to hold our own,” he said.

The decision by some farmer-owned terminals to buy a stake in the Alliance Grain Terminal in Vancouver will provide an extra level of assurance when it comes to accessing global grain markets, Hittel added.

Alliance is a 100,000 tonne export facility owned by Prairie West Terminal, Weyburn Inland Terminal, Great Sandhills Terminal, North West Terminal in Unity, Sask., Paterson Global Foods and Parrish & Heim-becker.

Rob Davies, general manager of the Weyburn Inland Terminal, said independent terminals have been forced to evolve quickly in the new environment.

“Our industry has seen a year of tremendous evolution with the movement away from the wheat board,” said Davies.

“I think probably that most people in the industry thought they were better prepared than they were, most likely, and when we got into it a month or two … we realized that there were … lots of little things that needed to be dealt with.”

Improved rail regulations will be another key to ensuring a strong grain handling industry, he added.

“As an industry, we’ve been waiting a long time for some balance in rail service.”

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