Truck drought made rail chaos worse

Delays caused order cancellations for small Canadian grain exporters in 2013-14

The 2013-14 bumper crop also created the 2013-14 grain truck drought, the Grain World conference heard Feb. 25.

It made the epic logistical problems of last year even worse, said Dulcie Price, president of Optimum Agra Services.

“Manitoba generally had an awesome corn crop,” she told a panel discussion about how small grain shippers survived the rail crisis.

“It took care of all the needs of all of the Manitoba feeders, so the trucks that would come up from the States, from North Dakota, weren’t coming up.”

Trucking was a key alternative to plugged grain elevators for many farmers, allowing them to move crop to pay bills.

However, they were faced with enormous difficulties finding trucks, and rates went sky high.

A truck hauling U.S. corn to a Manitoba hog barn typically picks up a Manitoba crop such as soybeans or oats for the backhaul be-cause there is demand for those crops in the United States. It makes the two-way price for trucking reasonable in many cases.

However, few American trucks came north in 2013-14, and farmers or grain companies that wanted to haul south had to pay exorbitant one-way rates, which escalated as demand spiraled higher.

Ryan McKnight of Linear Grain was one of the exporters who had to book those expensive trucks. His company’s two elevators in southern Manitoba and northeastern Saskatchewan had big sales commitments to U.S. buyers of oats and other commodities.

It seemed like a good business arrangement when rail cars seemed plentiful in the summer and September, but McKnight’s company was badly exposed on both purchase and sales contracts when the crisis hit.

“We ended up being up to three months late taking oat contracts in northeastern Saskatchewan, and we were late delivering our contracts to end use customers,” he said.

One buyer backed out of a delivery contract on oats that were already in rail cars, while another demanded that Linear quickly deliver on a commitment or pay the difference on the price of imported Scandinavian oats, even though there were no rail cars to deliver the Canadian oats.

Linear worked with long-time trucking providers to haul the oats to where they needed to go, but the cost was massive.

McKnight said Linear probably lost $50 a tonne between what it had assumed transportation costs would be when the contract was signed and what it actually cost to deliver the crop to the buyer.

And that was only for his elevator in Carman, Man. The one at Arborfield, Sask., was essentially cut off.

“Had we had to do that in Saskatchewan, I estimated it would have cost us $120 a tonne,” said McKnight.

Another option was to use “farmer freight,” in which a farmer would haul his own grain to a buyer in his own truck. It was OK for short hauls, but long hauls with restricted U.S. truck sizes were devastating.

One Saskatchewan farmer spent five days delivering two 1,500 bushel loads to a Minneapolis oat buyer.

“It’s really not something in my opinion that’s going to work,” said McKnight.

Allan Johnston of Johnston’s Grain in Welwyn, Sask., said his company faced enormous problems when producer cars that his company had arranged with growers and buyers failed to show up for months.

“The cars didn’t come,” he said.

When his company could deliver grain to the U.S. by either rail or truck, it found that American buyers were suddenly picky about all sorts of specifications that hadn’t previously been a factor.

McKnight said his company lost hundreds of thousands of dollars on increased shipping costs and lost sales, but its longstanding trucking focus eventually allowed it to move a lot of grain when the crisis lessened and made the year “one of our most successful years on record.”

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