Some of western Canada’s small grain companies are sounding alarm bells
about the impact of commercial tendering of Canadian Wheat Board grain
shipments.
They say big grain firms are using their economic and logistical muscle
to put the squeeze on smaller players.
And they say they’re in a fight for survival.
“I think there’s a real possibility we could lose some farmer-owned
grain companies,” said Alec Dyok, president and chief executive officer
of North East Terminal Ltd., of Wadena, Sask.
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Keith Bruch, director of grain operations for N. M. Paterson and Sons,
says tendering is proving disastrous and will inevitably lead to the
demise of small grain firms.
The ultimate result, he said, will be a less competitive grain handling
and transportation system, fewer grain buyers and higher costs for
farmers.
“In our opinion (tendering) is having devastating consequences not only
on the industry but on farmer choices,” said Bruch.
The small grain firms say the big grain companies that own export
terminals have been using the money they earn at the terminals to
subsidize “extraordinary” bids on CWB tenders, sometimes as high as $18
a tonne.
Companies that don’t own terminals and depend on their country
operations for revenues can’t compete with those kinds of discounts
over the long term.
“As single point shippers without any assets at the coast, we’re at a
complete disadvantage,” said Dyok, adding the big companies themselves
are probably taking a financial hit from the aggressive tenders.
Smaller companies can be highly competitive on the basis of their close
business relationship with local farmers, trucking premiums, grade
deals and so on, he said, but with tendering, that all goes out the
window.
Bruch said Paterson charges farmers about $13.50 a tonne for elevation
and cleaning at country points, so a discount of $18 a tonne is
untenable.
He added that while small companies could be facing a fight for
survival, Paterson’s concerns about tendering aren’t driven totally by
self-interest.
“We are actively bidding and we are winning tenders and we are a low
cost operator,” he said. “We just think this is not productive for the
industry or for producers.”
Under an agreement with the federal government, the board is required
to tender at least 50 percent of its grain shipments in the crop year
that began Aug. 1, up from 25 percent the previous year.
At least one of the big grain companies has asked the board to tender
all of its shipments this year, but the agency says it plans to stick
to the 50 percent target.
A number of small grain firms sent letters to federal cabinet members
in July asking the government to freeze the board’s tenders at 25
percent and analyze the impact of tendering.
As of last week, the companies had not received a reply from either
Transport Canada or wheat board minister Ralph Goodale.
The companies made a number of other points in their letters to Ottawa:
- to finance tendering, grain companies are cutting trucking premiums
and other programs, so there is no net gain for farmers.
- because revenue from tendering goes into CWB accounts, individual
farmers who deliver grain for tendered shipments don’t get a direct
benefit.
- because the CWB is a monopoly, companies that don’t win tenders have
no other supplier to turn to.
Bruch said Paterson and other small grain handlers supported the
introduction of tendering, but had assumed it would be accompanied by
other reforms, such as joint running rights and increased rail
competition.
“Tendering was to be part of a package but we haven’t seen the other
components come into place at all,” he said.
With a short crop, the big firms have been aggressively using tenders
to buy market share. However, Dyok said a big crop could create even
more problems for the small firms: “At least now they need grain from
us.”
CWB spokesperson Rheal Cenerini said the agency is aware of concerns
about the financial impact of tendering, but also wants to secure the
lowest cost transportation it can for farmers.
“It’s a balancing act,” he said. “In the long term we do want both
small and big companies to survive and provide farmers with delivery
options.”
