SASKATOON – The Canadian Wheat Board has asked the federal government to give farmers a short-term break on freight rates.
The board says all grain delivered to elevators before the end of the crop year should move under the 1994-95 freight rate, even if it isn’t actually shipped until after Aug. 1, when dramatically higher freight rates will be in effect.
If that doesn’t happen, it means farmers’ 1994-95 returns will reflect 1995-96 freight rates.
“We think that there is good reason to treat inventory in the commercial system on the basis of this year’s freight rates rather than next year’s,” said CWB chief commissioner Lorne Hehn.
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federal government proposed several months ago to increase the compensation rate from 80 to 90 per cent and double the maximum payment from $3 million to $6 million
“Whether or not the government will do that, we’ll have to wait and see.”
When the new crop year begins, the farmers’ freight rate on export grain will roughly double to an average of $30 a tonne, as a result of the elimination of the Crow Benefit rail subsidy.
As things stand, a farmer delivering grain July 31 will pay the 1994-95 freight rate of around $15 a tonne.
But when that grain is shipped out by rail after Aug. 1, there will no longer be a federal subsidy and the shipper will have to pay to the railways the full freight rate of about $30 a tonne.
For wheat board grains, that extra $15 a tonne will come out of the 1994-95 pool accounts, reducing this year’s total payments to farmers. Even a farmer whose grain was all delivered and shipped under the old 1994-95 rate would see his or her returns reduced because of the Aug. 1 freight increase.
Hehn said the board is expecting great pressure on the board to buy as much grain as possible before the new freight rates come into effect, especially since it is also projecting lower wheat prices in 1995-96.
Will do their best
The board will do what it can, but it can’t call grain into the system solely to help farmers avoid a freight rate hike.
“To the degree that we have sales available, we’ll do what we can to bring it in,” said Hehn. “But if we’re bringing it in, we’ve definitely got to feel that we’re going to move it out before the pool closes.”
For non-board grains like canola, farmers will likely see the higher 1995-96 freight rates show up in the basis a month or two before the end of the crop year, depending on each company’s inventory and sales positions.
“I expect the basis to the farmer will be increased to account for that extra freight probably sometime in June,” said Reg Willems, canola marketing co-ordinator for Sask-atchewan Wheat Pool.
He said it remains to be seen whether some of the additional freight on export shipments of canola can be passed on to the Japanese buyers.
