The Canadian Wheat Board will be unable to do its job if Arthur Kroeger’s recommendations are adopted, say officials with the grain marketing agency.
“His recommendation has left less room for the board than the Estey report did,” said CWB director Ian McCreary, chair of the board’s transportation committee. “Kroeger talked about finding compromises, but he went to the extreme that was beyond even what Estey would suggest.”
Kroeger, who led four months of consultation with grain industry stakeholders this summer, has recommended to the federal government that the board be removed from the day-to-day logistics of moving grain from country elevators to export position.
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Instead, grain companies and railways would be responsible for transportation logistics.
“The object is to bring as much market forces to bear as you can,” Kroeger said.
“If grain companies are responsible all the way from the elevator to the spout, that increases their accountability,” and leads to more competition and lower costs.
McCreary, a Bladworth, Sask., farmer and a former regional sales manager for the board, said Kroeger’s proposal doesn’t give the board the flexibility and control it needs to respond to rapidly changing sales opportunities.
For example, he said, a customer scheduled to pick up a 30,000 tonne sale may call at the last minute and say that it has some additional ocean freight and wants to load 40,000 tonnes instead. Under the system proposed by Kroeger, he said, the board could be unable to meet the customer’s needs.
“If Canada wants to lock itself out of that kind of business, we lose a competitive edge.”
McCreary said that under a 100 percent tendering system, grain companies supplying the logistics would be in a position to extract premiums from the board, reducing the money that goes to farmers.
“It just becomes riskier and more expensive to make those types of things work.”
CWB chair Ken Ritter said the board operates in a “just-in-time” business world and won’t be able to compete if it doesn’t have a direct role in gathering and moving grain to port.
“If you ask, ‘does Cargill grain in the U.S. sub-contract all of its logistics?’, the answer is, ‘no, are you kidding?’ They want to have the levers by which they can attract the grain in to meet their commercial contracts to their customers and that’s all we’re saying we want.”
Kroeger said the board’s objections to a contract-based tendering system don’t hold water.
“A system of contracts, with attendant penalties and awards, tied to performance, is the common currency of the commercial world and should also be applicable to grain handling and transportation,” he said in his letter to Collenette.
How the Kroeger plan would work
- At the beginning of the crop year, grain companies would contractually commit to deliver a significant portion of the board’s annual sales requirements.
- There would be a three-year transition period toward a tendering system for specific movement of grain. Tendered contracts would account for 25 percent of CWB grain shipments in the first year, 50 percent the second and 75 percent the third, with the balance allocated to grain companies on the basis of performance.
- The transition period would be mandatory and could be interrupted only if serious problems emerged.
- The board would assume custody of the grain “at the spout” when it is loaded onto a ship, rather than “in-store” which is when it arrives at the export terminal.
- Companies would be given “maximum scope” to compete for producers’ grain by varying the basis (charges for moving grain from farm to ship.)
