AGT Food and Ingredients has put in place the missing piece in its bulk grain supply chain.
The company has signed a 20-year terminal services agreement with Fibreco Export Inc. at the Port of Vancouver. Financial terms of the deal were not disclosed.
AGT will soon be able to source pulses and durum from farms in central Saskatchewan, transport them on its short-line railways to Canadian National Railway’s main line and ship them through the Fibreco terminal to its processing plants in places like Turkey.
Fibreco moves wood chips and wood pellets through its existing terminal in North Vancouver. As part of the AGT deal, the company has agreed to build an agri-products export terminal at the site.
It is adding 43,000 tonnes of dry bulk storage, enhancing its rail capacity to receive full unit trains, putting in a new ship loader and expanding its ship berth so it can load Panamax vessels.
AGT will have first rights to the terminal’s new grain handling capacity.
President Murad Al-Katib said getting tidewater access on the West Coast is the perfect complement to the company’s recently acquired rail assets and will help grow the business.
“This deal has the potential for us to triple the size of our Canadian business,” he said.
“It’s all about logistical control.”
Mark Hemmes, president of Quorum Corp., which is Canada’s grain monitor, said any additional grain handling capacity on the West Coast will help Canada better serve customers in Asia.
“That’s where our markets are going to be, so anything that adds to that has to be a positive thing,” he said.
Hemmes said Fibreco has been looking for ways to diversify its product mix and recently started shipping canola meal pellets. He believes moving grain and pulses is the logical next step for the experienced shipper.
“It’s not like they’re starting from scratch,” he said.
“They know how to load boats. They know how to handle product. The rail tracks are there.”
The only downside of the project is that the north shore is a tough place to get to, and this will add to the rail congestion.
“It’s not a show-stopper or anything like that. It’s just something that (CN) is going to have to figure out,” said Hemmes.
AGT owns two short-line railways in central and west-central Saskatchewan: Last Mountain Railway, which runs from Regina to Davidson, and Big Sky Rail, which goes from Delisle to Eatonia with branches running to Kyle and Beachy.
It also owns a handful of producer car loading facilities that it acquired with the purchase of West Central Road and Rail.
AGT is building a rail consolidation centre in Delisle where rail cars from both short lines can be consolidated into unit trains, which will travel on CN’s main line to the Port of Vancouver.
“We made a big bet on rail, and the rail business wasn’t to own railways, it was to move grain,” said Al-Katib.
For the longest time AGT focused on moving grain by container and left the bulk business to the main-line companies, but these days half of its product is shipped in bulk through ports in Thunder Bay, Quebec City, Prince Rupert and Churchill when it was still open.
AGT will focus on shipping peas, lentils and durum in bulk, but it also plans to expand its offerings.
“You will start to see us active in CWRS and even canola,” said Al-Katib.
Construction of the new agri-products export terminal is expected to be complete in 2019. Fibreco anticipates shipping 500,000 tonnes of grain in the first full year of operation and gradually increasing to two million tonnes by year five.
The terminal will be able to land, unload and release a 112 car unit train in 24 hours. By the time the terminal is at full capacity, it will be loading 36 grain vessels a year. The average volume of cargo per vessel will more than double to 46,000 tonnes from 22,000 tonnes.
Partnering with Fibreco was deemed preferable to spending a “couple hundred million” dollars building a terminal from scratch and getting all the necessary land and permits to do that, said Al-Katib.