WINNIPEG – A proposed new system of distributing rail cars should put more money into farmers’ pockets when they deliver grain, says the Canadian Wheat Board.
The board says its car award plan will force grain handlers to fight for farmers’ business.
“I think producers will see increased competition out on the country driveway, because it will be in the companies’ best interest to provide good service to farmers,” said Adrian Measner, the board’s executive vice-president for marketing.
And the harder grain companies compete, says the board, the better off farmers will be.
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The details of the new car award system are still being thrashed out in negotiations between the CWB and the grain handlers and it may be weeks or months before they go into effect.
The awards system will apply to 75 percent of CWB grain movement. Transportation logistics for the remaining 25 percent will be awarded through public tenders.
Grain handling companies vigorously oppose the board’s car awards plan. They say it does nothing to reduce costs or increase system efficiency and interferes with their right to manage their assets.
“It’s a very populist solution, I’m sure, but it does not answer the quest for efficiency and timeliness of rail service and predictability to benefit the overall system,” said Curt Vossen, president of James Richardson International.
The board says the details are negotiable, but not the principle of awarding cars on the basis of where farmers want to deliver their grain.
Here are the basics of how the new system might work.
oA farmer signs a contract to deliver 100 tonnes of CWB grain to company A.
- The farmer hauls 10 tonnes against that contract. Company A receives rail cars to ship that 10 tonnes and is credited with enough cars to move the remaining 90 tonnes.
oThe farmer doesn’t like the price or service he got from company A and decides to haul his next 10 tonnes down the road to company B.
- Now, company B gets rail cars to move that 10 tonnes and is credited with sufficient cars to move the remaining 80 tonnes. As a result, company A loses the cars it had previously been credited with.
“There is going to be a real market responsiveness in terms of where farmers do business,” said CWB spokesperson Jim Pietryk.
In an eight-page transportation policy brochure mailed to farmers this week, the board says the plan will put producers into a much better bargaining position with grain companies than is now the case.
Grain companies will do everything they can to service the producers’ needs, because the number of cars they receive will be based on how much business they hold.
“Ultimately this should mean better service and better value for the producer,” said the board.
Grain handlers disagree.
Gord Cummings, chief executive officer of Agricore, says any system of distributing rail cars must be designed to ensure that the right grain arrives at the right place at the right time to meet customer demand.
The board’s plan doesn’t do that, he said. Grain companies should earn market share in CWB grains by meeting the needs of the board and its customers, not by competing to bring more grain into their elevators.
And he added that all one has to do is look at the companies’ financial results to realize there is already plenty of competition among grain handlers.
The grain companies say the board’s plan allows farmers to “push” grain into the system, when what is needed is a system that “pulls” grain in as it’s needed.
But Measner rejected that description, saying farmers will only select the location to which to deliver. The boards’ contract calls will ensure that only grain required in export position is delivered.
“This does not change what comes into the system,” he said. “It does drive who gets the cars as it comes into the system.”
Measner also said the board wants to ensure that farmers get good rail service no matter where they choose to deliver their grain.
It’s obviously a grain company’s decision whether to keep a particular delivery point open and they’ll still have the final say over which elevator gets cars.
But the board intends to monitor elevator shipping to ensure that producers can haul to the facility where they have contracted to deliver.
“If the point is open and they’re handling CWB grain and we’re going to be paying for that service, we’ll want to be sure there is appropriate service to that point,” said Measner.
