Weyburn Inland Terminal has been warning for months that the tendering system for shipping Canadian Wheat Board grain is hurting its ability to compete and reducing its profitability.
Now the terminal has released financial results that seem to back that up.
The company last week reported an after-tax profit of $52,000, or five cents per share, for the three months ending March 31, representing the first quarter of the 2003 fiscal year.
That’s down sharply from a profit of $398,000, or 42 cents per share, for the same period a year earlier.
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The company attributed the drop to a dramatic reduction in shipping opportunities for CWB grain.
While that’s partly because the grades that were shipped by the board during the period didn’t mesh with the grades available in WIT’s business area, company officials said the tendering system also played a big role.
“The tendering environment for rail cars to ship CWB grains has had a negative impact on our per tonne profitability, and reduced shipping opportunities outside of tenders has limited our ability to move our customers’ grain,” said president Claude Carles.
The CWB has been required to ship half of its export program through commercial tenders in the 2002-03 crop year.
Throughout the year, smaller grain companies and inland terminals such as WIT have complained that the big grain firms with extensive networks of country and terminal elevators have bought market share by bidding at levels that the smaller companies can’t match.
The Inland Terminal Association of Canada has formally asked the board to end tendering when the agreement with the grain handling industry expires July 31.
Discussions on the system’s future are expected to intensify over the next few weeks.
Rob Davies, chief executive officer, said WIT has successfully bid on some tenders, but its business philosophy of offering farmers the lowest possible handling tariffs puts it at a disadvantage when tendering.
“To this point we’ve tried to maintain our low costs to farmers, but that limits our ability to tender because we have less money available to work with.”
Davies said WIT didn’t have good supplies of the types and grades of wheat being shipped by the board during the winter and the type of grain it does have has moved by tenders.
However, he emphasized that the terminal’s grain business has only been delayed, not lost completely.
“We’re expecting things to pick up over the next couple of months,” he said, adding it has already improved during the second quarter.
He said the current system also undermines farmers’ ability to choose where to do business because the big companies can in effect buy rail cars, ship grain and create more space to take in deliveries.
The poor grain results in the first quarter were partly offset by strong farm input sales and reduced tax payments.
In fiscal 2002, the company had an after-tax profit of $2.7 million, down from $3.8 million in 2001. Grain volumes last year totalled 515,000 tonnes, up from 466,000 tonnes in 2001-02.
The company declined to release detailed grain handling statistics for the first quarter of 2003, but Davies said volumes were about half of last year’s first quarter.
In March, the company paid a semi-annual dividend to shareholders of 55 cents per common share, an amount totalling $528,000.
