Farmer-owned inland terminals and producers who load their own cars have more questions than answers about what the future holds for them in a post-single desk world.
“We’re grappling with what it is going to mean,” said Kevin Hursh, executive director of the Inland Terminal Association of Canada (ITAC).
Inland terminals and producer car loaders rely more heavily on board grain than the big players in the handling industry and are more dependent on CWB services.
Members of both groups will be watching how Ottawa dismantles the monopoly and what role the wheat board will play in the grain handling industry once that happens.
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“The business reality of it is, how (the CWB) is structured going forward is going to be a big deal to inland terminal members,” said Hursh.
He has members who despise the board and those who worship it. Both camps have questions and concerns.
For instance, inland terminals haven’t had to worry about arranging credit to buy wheat, durum and barley from farmers for export because it has been handled through the CWB’s Prepayment of Inventory Program.
“Suddenly you’ve got a whole bunch of extra credit requirements and cash flow requirements if you’re going to play in that game by yourself,” said Hursh.
Other concerns include how the rail car allocation system will be handled and whether inland terminals will still be able to access the wheat board’s marketing services.
The questions facing producer car shippers and the short-line railways they use are more life and death.
CWB chair Allen Oberg said producer car loaders will still have the right to ship grain, but they will face railways that don’t want to spot them cars and grain companies that have no interest in handling their product.
“Producer car usage will be minimal and of course all short lines are heavily dependent upon producer car movement,” he said.
“The future for them I don’t think looks all that rosy.”
He also worries about the fate of the Port of Churchill. In some years the CWB is its only customer.
“Because all the grain companies have port facilities elsewhere, I can’t see that terminal being used to any great extent.”
Armand Roy, director of operations for Wheatland Rail in Cudworth, Sask., doesn’t expect an immediate impact because the Canadian Grain Commission handles rail car distribution for producer cars.
“That is not going to change,” he said.
However, he is concerned about the loss of a powerful supporter and promoter of producer cars.
“The biggest impact certainly is that we just won’t have that ally in the corner fighting for us. We could be muscled out if that takes place,” said Roy.
“Even though you wouldn’t hear a lot of it, the wheat board was certainly in the background helping us out and we’re going to feel that loss.”
Hursh said each of the 10 farmer owned terminals he represents, which collectively handled 1.7 million tonnes of CWB grain in 2009-10, will be affected differently by the demise of the single desk.
Some feel vulnerable, considering the large grain companies have full access to port terminals, stronger international marketing departments and the ability to juggle rail car allocation between multiple loading points.
Others don’t feel as susceptible because they have existing marketing arrangements with bigger companies.
Even before the Conservatives won a majority May 2, there were signs of consolidation in an industry where 5,000 mostly farmer shareholders own an estimated $370 million worth of assets.
In March, Richardson International entered into an agreement to buy North East Terminal, one of ITAC’s founding members.
“There are some who believe that it is going to be very difficult to maintain the independents,” said Hursh.
Most of the terminals could be sold for a big return on the original investment, providing farmer investors with a tidy profit on their shares.
“It will depend on how strongly the producers feel that a marketing option and some independents in the marketplace (are) worth preserving,” said Hursh.
CWB FACTS &FIGURES
•The Canadian Wheat Board is the largest marketer of wheat and barley in the world with annual sales of $4 to $8 billion to 70 countries
•It markets 18.8-23.2 million tonnes of wheat, durum and barley each year
•It operates grain pools and a range of producer payment options
•The board co-ordinates grain movement across the country, allocating rail cars and co-ordinating arrival of ships
•It has a staff of 441 employees with an administrative expense of $70.5 million (2009-10). That works out to $3.24 per tonne of wheat
•The CWB contributes $2.3 million to the Canadian International Grains Institute and the Canadian Malting Barley Technical Centre
Source: 2009-10 CWB annual report, staff research
