Grain companies are competing hard for the chance to move grain under the Canadian Wheat Board’s tendering program early in the 2006-07 crop year.
In the past couple of years, low quality crops resulted in modest bids and periods in which the board actually had to pay premiums to grain shippers to ensure grain was moved to export position to meet sales.
So far this year things have changed, with a better quality and larger crop.
Grain companies are anxious to move grain in and out of their elevators in the post-harvest period and are bidding accordingly on tenders.
Read Also
Government, industry seek canola tariff resolution
Governments and industry continue to discuss how best to deal with Chinese tariffs on Canadian agricultural products, particularly canola.
“We’re already seeing the companies being very aggressive,” said Dennis Portman, the board’s director of logistics.
Some companies have bid as much as $15 to $20 a tonne under the posted handling and transportation rates in order to win tenders.
Brian Hayward, chief executive officer of Agricore United, expects to see a strong fall export program and a lot of pressure on rail capacity.
“I think there will be more aggressive tenders on the top grades,” he said.
Portman expects things might settle back after the harvest pressure eases, but 2006-07 will almost certainly produce significantly more tendering-related savings for farmers than was the case in the past two years.
“If the current trend continues, and there is no reason it wouldn’t, we should probably expect savings returned to the pools beyond the last couple of years,” he said.
Back in 2003-04, with lots of high quality wheat around, grain companies bid aggressively to win CWB tenders, producing total transportation savings to the pool accounts (including tendering and other programs) of around $51 million.
The next two years saw quality problems, and the board paying premiums, resulting in total transportation savings of $26.6 million in 2004-05 and $17 million in the first nine months of 2005-06.
Portman said the premiums were necessary to provide customers a scarce commodity of high quality grain.
“Tendering is there to source the product as much as it is to generate revenue,” he said.
“We don’t have the same sourcing issues this year, so we’ll likely see better returns from tenders.”
There are no changes to the rules for the board’s tendering program this year, with a target of shipping about 20 percent of the board’s sales program through tenders.
Portman said the board will likely be a little below 20 percent when all the numbers are added up for the 2005-06 crop year.
