The battle for control of grain transportation took another unexpected turn last week.
Responding to a new rail shipping program brought in by CP Rail, the Canadian Wheat Board is now paying the freight bill directly to the railway, rather than through grain companies as has been the practice.
The board says that means it will now be named on the bill of lading and qualify as the shipper under CP’s program.
The agency said it took the action to try to ensure that it can get enough rail cars to meet the needs of farmers and customers.
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“CP designed a program that did not allow us to participate because of the argument over who is the shipper,” said wheat board spokesperson Trish Jordan. She said the board was able to obtain only 1,300 of the 2,800 cars it wanted for this week.
Jordan described CP’s program as a “fundamental change” in the grain shipping system that effectively froze the board out of transportation logistics.
CP assistant vice-president Ray Foot rejected the wheat board’s description, saying the board always had the ability to secure its entire car supply through the CP program.
“We have gone forward so as not to exclude any party from being the shipper,” Foot said.
He said the board could make up any car shortfall by negotiating with grain companies that had cars.
The board maintains the CP program defined the shipper in such a way as to give grain companies an advantage over the board in booking cars.
With CP promising freight discounts of up to 35 percent under its new program, the board said it wanted to be sure it could get those savings and pass them on to farmers.
The issue of who is the shipper of wheat board grain has been a major point of contention in setting up a new logistical system. Traditionally, the railways have sent the freight invoice for each rail car to the grain company named on the bill of lading. The grain company then receives money from the board to pay the bill.
As of Nov. 5, the board will be listed on the bill of lading rather than the grain company and will receive the invoice from the railway. The board expects to receive about 1,300 invoices daily totaling about $3 million.
At the end of the day, of course, farmers pay the freight no matter how the paperwork is handled.
But the issue of who is considered to be the legal shipper is crucial in determining who can order cars and arrange transportation logistics.
Foot said the railway set up the program on relatively short notice because there was no industry agreement to continue with the temporary car allocation program that has been used this crop year.
“There was a void that had to be filled,” he said.
“We are a common carrier and we had to have a process in place that allows our shippers to order cars.”
He said the program doesn’t define who is the shipper. Rather, it outlines a number of conditions that the shipper must meet, including such things as designating a point of origin and destination, the ability to load cars, paying the freight and being named on the bill of lading.
“The party who carries out those functions will be the shipper and can order cars from us,” he said.
This is the latest development in the power struggle among the board, grain companies and railways over who will control transportation logistics under the federal government’s new grain shipping rules.
Will Hill, senior vice-president of Saskatchewan Wheat Pool’s grains group, called the CP program a positive step.
He said the issue of who is the shipper really boils down to a question of who is best placed to provide the detailed logistical planning for shipping grain.
The board can argue that it needs to be able to negotiate for its overall car needs, he said, “but the issue now is how does the board take that overall capacity and put that into a specific movement that takes advantage of all of the investments and efficiencies that are in place.”
