SASKATOON – St. Lawrence Seaway promoters say they’ll continue lobbying for a change in the method of payment despite projections that a producer payment would mean a reduction in eastbound grain exports.
For several years, Seaway users and politicians along the inland waterway have been calling on Ottawa to stop paying the annual Crow Benefit subsidy to the railways.
But the recently-released report of the federal government’s producer payment panel suggests that might not be such a good idea after all.
Both the production and export of prairie grains will drop sharply if the subsidy is instead paid directly to farmers, said the report.
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In Manitoba, production would be 10 to 15 percent lower by the end of the decade. Last crop year, about one out of every three bushels of grain shipped to Thunder Bay originated in Manitoba.
The report also said total prairie grain exports in 1999 would be about five million tonnes lower under a producer payment scheme.
Manitoba outlook
In Manitoba, wheat exports would be 4.2 million tonnes under pay-the-railways, 3.6 million tonnes under pay-the-producer with pooled Seaway costs and 3.1 million tonnes under pay-the-producer with farmers footing their own Seaway bill.
Brian Paddock, an Agriculture Canada official who worked on the report, said that while there was no detailed analysis of the impact on export grain movement, the production and export numbers speak for themselves.
“If you look at the results and say ‘what does this mean for the Seaway?’, we have to say it’s not positive,” he said in an interview. “There is less exportable surplus in the eastern prairies. There’s less production and a little more feeding of livestock.”
One official closely involved in moving grain through Thunder Bay was even more blunt in his assessment.
Seaway groups that support a producer payment are “slitting their own throats,” said the official, who asked not to be identified: “The bottom line is less grain is produced and that means less shipments through Thunder Bay, but I can’t get them to understand that.”
Canadian Shipowners Association president Norman Hall was in Ottawa last month telling a Commons committee that changing the method of payment is crucial to the future of the eastern grain export system.
In an interview last week he said with a chuckle that the panel report “gives me a hiccup,” but added the organization isn’t about to change its position. It’s hard to know exactly what will result from a change, he said, but things can’t get much worse for the Seaway.
Won’t change position
“I think we will stick by our position. Pay-the-producer may or may not provide additional trade for us, we don’t know, but it’s better than what’s there,” he said. “The current situation doesn’t give us any opportunity for change and we’ve felt if it was a free market system, maybe it would.”
Cy Cook, general manager of the Thunder Bay Harbor Commission, thinks the report overstates the decline in grain production. But even if projections are correct, it’s still desirable to eliminate direct subsidies to the railways and change the Western Grain Transpor-tation Act to eliminate biases in favor of westbound shipment.
“It will provide us with a more stable base, whatever that level is,” he said. “In the long run, we think we’re better off with the freer market.”
University of Manitoba economist Daryl Kraft said the impact of a producer payment on the seaway depends on whether it’s accompanied by a broad deregulation of the transportation and handling system.
If a change is made in isolation, reduced production and exports out of Manitoba will likely be the result, he said, particularly if Seaway costs are also removed from the Canadian Wheat Board’s pool accounts.
But he doesn’t expect that to happen. “I don’t think, if method of payment changes, that farmers or grain companies will tolerate the existing rate structure,” he said. “Inevitably there has to be a broader deregulation.”
If freight rates are no longer strictly distance-related and if elevator companies are free to set handling tariffs where they want, then the additional costs of shipping export grain east may be mitigated, he said. Manitoba farmers may not change their production habits as much as the report projects and eastbound shipments may be unaffected.
