Western Canada’s small grain companies are happy with the Canadian Wheat Board’s decision to keep the same tendering policy in place for 2004-05.
The policy calls for a maximum of 20 percent of the board’s sales program to be shipped under commercial tenders.
Another 20 percent moves under an advance booking program, with the remaining 60 percent based on a company’s historical receipts and deliverable farmer contracts.
The board shipped 2.48 million tonnes of grain through commercial tenders in 2003-04, just a fraction under 20 percent.
“We’re very comfortable with what happened last year,” said wheat board chief executive officer Adrian Measner. “We heard a lot less concern from farmers about service, compared with the previous year.”
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Under the old rules, the board was required to tender a minimum of 50 percent of its sales program.
The new rules were designed to give farmers more control over where rail cars are placed, while still providing shippers with financial incentives through tender and advance awards.
The decision to stick with the 20 percent maximum for 2004-05 was welcomed by small grain companies, which say tendering puts them at a serious competitive disadvantage to the major companies.
“For our business, we found the rules last year to be effective,” said Andy Travers, general manager of Gardiner Dam Terminal, a farmer-owned inland terminal at Strongfield, Sask.
Large firms want more
However, an official with one of the major grain handlers is disappointed the board won’t move to 100 percent tendering.
Radean Carter of Agricore United said the 20 percent rules limited the ability of grain shippers to gain new efficiencies that would result in lower costs for farmers, shippers and customers alike.
“We still maintain that 100 percent tendering at port would be a better system,” she said, allowing grain handlers to focus on logistics, and the CWB on marketing.
However Jason Skinner, chief executive officer of North West Terminal of Unity, Sask., said the past two years showed that the big companies are willing to make “unreasonable” bids to buy market share.
Statistics from the federal grain monitor show that in the first six months of 2003-04, tenders averaged about $23.04 for wheat and $24.07 for durum, up about 35 percent from the year before.
Those numbers are expected to decline in the second half of the year, although precise figures were not yet available.
Industry officials say those high numbers reflect intense competition among grain handlers for grain supplies during a period of limited rail car supplies.
“The current approach provides an opportunity for companies that need some shipping to access it on a short-term basis,” said Skinner.
If tendering was increased to 100 percent, the companies that could afford it would simply buy all the available transportation.
“We wouldn’t have much of an industry left,” said Skinner.
Statistics from the grain monitor show that in the first half of 2003-04, the four major grain companies (Saskatchewan Wheat Pool, Cargill, Pioneer and AU) handled 86 percent of tendered CWB shipments, compared with 68 percent of non-tendered movement.
Keith Bruch, director of grain operations for N. M. Paterson and Sons, said his firm favours zero tendering.
Farmers would fare better if grain companies competed directly for their business at the elevator rather than by buying rail cars from a monopoly supplier and having any savings dispersed through the pool accounts.
“We don’t see any gains to the transportation system from tendering,” Bruch said.
