The Canadian Wheat Board will soon consider whether to buy some 1,500 grain hopper cars being leased by the federal government.
The board holds a purchase option on the leases, which it administers for the government at no cost to the pool accounts.
Those 25-year leases expire in 2006 and the board will have to make a decision about whether to exercise its purchase options.
“We will be putting together a recommendation to the board (of directors) in the near future,” CWB chief executive officer Adrian Measner said.
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He emphasized that no decision has been made on whether to make a purchase.
According to the board’s most recent annual report, between 1991 and 1995 the board bought options to acquire 1,550 of the leased cars. There are 1,473 still in service, carrying a price tag of around $20.9 million.
Measner said the board will have to weigh the cost of buying cars against the need to retain grain-shipping capacity in the system.
“Certainly there hasn’t been a surplus of equipment in the fleet,” he said.
“We want to make sure there is sufficient capacity in the system so we’re going to have to take that into account as we make that decision.”
Another way to keep the cars in grain service would be for the federal government to renew the leases.
However, Measner said that’s not likely to happen, given the fact that several years ago Ottawa chose not to extend the leases on about 300 cars.
Sinclair Harrison, president of the Farmer Rail Car Coalition, which is engaged in unrelated negotiations to buy 12,400 government-owned hopper cars, said it’s important that the leased cars remain in the grain fleet.
“I’d like to see the CWB pick them up,” he said. “It will be a cost to the system, but the capacity is worth more than the cost.”
He said there is strong demand for hopper cars in North America, and if those cars aren’t purchased for grain service, they’ll be snapped up for some other bulk commodity such as potash or fertilizer.
“If someone doesn’t pick those cars up on behalf of farmers, we’re going to be some 2,000 cars short.”
The federal government originally leased 1,750 cars back in the late 1970s and early 1980s for a period of 25 years. The board agreed to administer those cars, with all costs borne by the federal government.
In 1995, the board purchased an option to extend the lease agreement on 250 cars, and exercised that right in 2000. Those cars were sublet to a third party in 2001, with the lease expiring October 2005.
