Changing Canada’s grain handling rules to comply with a World Trade Organization judgment could mean more American grain will flow into Canada.
But senior Agriculture Canada official Howard Migie does not expect a flood of American grain that would burden an already-strained rail car fleet.
“It must be acknowledged that a net increase in imports is possible,” Migie told the House of Commons agriculture committee May 4.
“But if it does occur, it will be the result of commercial decisions on the part of producers, railways and handling companies.”
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Migie conceded there have been some industry worries that increased American grain flowing north could have adverse effects when the Canadian system is congested.
“Railways and the grain companies will be free to use commercial tools to address this situation should it arise.”
The Western Grain Elevator Association agreed. The potential for more American grain in the system will not cause a problem, it told MPs.
“Quite simply, the trucking costs involved in moving grain from the U.S. into Canada, along with the additional primary and export tariffs that would be incurred, primarily the additional segregation costs, would likely negate any significant volume being moved in this manner,” said Agricore United government relations director Cam Dahl, speaking for the elevator group.
The comments came as the Commons committee opened hearings on proposed legislation to bring Canada’s treatment of American grain into compliance with WTO rules.
Canada lost a decision last year in a case brought by the United States about Canadian discrimination against American grain imports. WTO rules require that imported grain be given “national” treatment when imported into Canada.
To comply with the ruling, bill C-40 would replace the requirement that the Canadian Grain Commission pre-approve the import or mixing of American grain in the Canadian system, with a requirement that there be notification only. It also would change the Canada Transportation Act to include in the railway revenue cap American grain imported into Canada and later exported.
American grain shipped through Canada but never unloaded or put into the Canadian elevator system will not be included in the revenue cap.
The bill must be law before Aug. 1 to avoid the possibility of American retaliation against Canadian agricultural exports moving south.
It is expected to be approved by committee this week with an amendment from the Conservatives that there be a full review of the Canada Grains Act and the Canadian Grain Commission within a year. However, with an election call possible within weeks, the bill may not make it through the House of Commons and Senate to become law before Aug. 1.
While that would put the U.S. in a legal position to retaliate, Migie said Canada would ask for a period of grace because efforts are being made to correct the rules.
The fear of an influx of new American grain has been one of the few potential problems identified by the industry.
“The economics would suggest that grain could be pulled as far as about 150 miles (240 kilometres) to the south of the border, given just the differential between rail freight rates,” Janet Weiss of Canadian Pacific Railway told the committee.
“It doesn’t speak to the other parts of the system in terms of grain handling charges and how they might differ. From our perspective, Canadian Pacific Railway, particularly west bound, is at capacity and we are severely limited in terms of our ability to handle incremental volume beyond today’s base business.”
Richard Wansbutter, Saskatchewan Wheat Pool vice-president, said the freight rate at Vulcan, Alta., is about $17.50 lower than at Shelby, Montana, but trucking the grain north can cost up to $20 per tonne and handling costs could be $10 higher in Canada.
“So when I add in the trucking costs and I add in the IP costs, it changes the economics and doesn’t allow that much to move in,” he said.
