Weyburn and Lethbridge on the block | Terminal association’s influence might weaken
The potential sale of two farmer-owned grain terminals in Western Canada may force the Inland Terminal Association of Canada to review its operations.
Kevin Hursh, executive director of ITAC, said the sale of facilities in Lethbridge and Weyburn, Sask., would leave ITAC with seven members, down from 11 just a few years ago.
Officials with Weyburn Inland Terminal (WIT) and Lethbridge Inland Terminal (LIT) have announced in the last few weeks that they are considering takeover offers that could see ownership transferred from farmer shareholders to private sector companies.
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Hursh said the loss of two large ITAC members will leave the association with fewer members, smaller volumes and potentially less influence on issues related to grain transportation and logistics.
“The Lethbridge deal sounds like a fait accompli,” Hursh said last week.
“It has to be taken to the shareholders yet, but I fully expect that takeover to happen and to be complete in fairly rapid fashion.”
WIT is accepting expressions of interest so may not be sold, but it opens up the possibility, said Hursh.
“It’s always sad, from my viewpoint, to see fewer terminals that are farmer controlled because it’s hard to imagine a scenario where you would ever see farmers getting back into (facility ownership).”
In 2011, Richardson International bought the North East Terminal (NET) near Wadena, Sask., along with crop input facilities in Wadena, Kelvington, Foam Lake and Ponass Lake.
Farmer shareholders at NET voted 92 percent in favour of selling.
Hursh said he does not know which companies have expressed an interest in buying WIT.
However, major companies including Viterra, Cargill and Richardson have been positioning themselves in key locations in hopes of expanding their share of the western Canadian grain market, he added.
CWB is also interested in buying grain handling assets in Western Canada.
Grain industry observers say CWB would like to acquire inland assets to reduce reliance on competing companies to handle grain that is sold through CWB programs.
“There’s speculation about what assets CWB might be looking at, but I don’t really have any specific knowledge of that,” Hursh said.
“I think it’s interesting that Viterra is stepping forward (in Lethbridge) and showing that they are still expansion minded.… You’d have to think that Richardson and Cargill are probably of a similar mindset, at least it’s hard to think of any reason why they wouldn’t be.”
The sale of Weyburn and Leth-bridge could render ITAC’s group insurance program unsustainable if just seven member terminals are left to contribute to group premiums.
A terminal must be at least 50 percent owned by farmer shareholders to join ITAC.
“The loss of Lethbridge will make it tenuous. If we were to lose Weyburn, we probably would not be big enough to maintain that same group insurance plan, so (if it happens) we’re going to have to look at what we can do or other options that we can explore.”
One option would be to offer associate memberships to producer-owned facilities such as specialty crop processors.
Meanwhile, Hursh said rail service at farmer owned terminals has been variable. Managers at some ITAC member terminals say they have been well served, while at other locations, service has been below expectations.
Hursh said its hard to get an accurate read on railway performance as it pertains to grain movement.
In addition to moving the largest crop in the country’s history, Canada’s major railways have also been operating in unusually cold temperatures for the past month.
Average temperatures were well below normal for most of December.
Canadian National Railway announced earlier this week that record-breaking cold temperatures are affecting railway operations across Western Canada.
The company plans to take precautionary steps such as reducing train lengths in some areas, implementing cold weather detours where appropriate and enhancing mechanical and engineering services in key areas.
