Most grain farmers have a pretty good idea what changes to the grain
handling and transportation system have done to their wallets over the
past few years.
Next month, non-farmers should get some idea as well.
The federal grain monitoring agency will submit its report on the
2001-02 crop year to the transportation minister in mid-December and
expects it to be tabled in the House of Commons in early January.
Included in that report will be a section outlining the net financial
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effect of the changes upon producers.
For farmers like Lorne Herndier, who grows grain near Melville, Sask.,
if it shows anything other than a big increase in farmers’ costs, it
won’t be worth reading.
“I would be very, very shocked,” he said. “Any report with any
credibility has to show how much more we’ve been paying and are paying.”
Herndier said while he doesn’t know the specific numbers for his farm,
there is no question he has faced a drastic increase in trucking,
handling and rail costs in the last few years.
“When you look at your grain ticket and you see one-third of the price
deducted off your settlement cheque in freight and handling charges
before you start, it doesn’t make you feel that good.”
The man in charge of the monitoring agency says he believes the report
will provide a credible and accurate picture of what is commonly called
producer netback.
“I’m very confident, far more so than I was,” said Mark Hemmes,
president of Quorum Corp., the Edmonton consulting firm hired by Ottawa
to act as the system monitor.
Hemmes acknowledged that the calculations in the report won’t include
every additional handling and transportation cost incurred by farmers
in recent years, nor will it take into account all the discounts and
incentives offered by shippers and grain handlers.
The numbers will be presented as provincial averages, and so won’t
reflect the situation facing every individual producer.
But it should at least enable them to put their own experience into
context.
“This will give the producer an opportunity to look at our numbers on a
regional level and calculate where he stands against it,” Hemmes said.
Farm groups consider the producer netback to be the most important part
of the grain monitoring process, which the federal government created
as part of a package of grain transportation reforms introduced in 2000.
The idea is to assess the extent to which efficiency gains and savings
realized by railways and grain companies are being passed back to
producers, something farmers were assured by Ottawa would happen.
The report will provide two separate measures, based largely on
published data and information obtained from cash tickets at 43
randomly selected prairie elevators.
First, it will calculate the export basis for wheat, durum, canola and
peas. That will include such things as rail freight rates, trucking
costs, primary and terminal elevation, cleaning charges and Canadian
Wheat Board costs, as well as any discounts and incentives offered by
railways, truckers and grain handlers or achieved through CWB tendering.
Second, it will subtract that basis from the export price of the
commodity to arrive at the net return, or netback, for the farmer.
Those figures will be compared with the base year of 1999-2000 and each
succeeding year to track changes.
The monitor’s report on the
2000-01 crop year included preliminary calculations of the basis and
netback for that year, but a number of crucial statistics, such as
trucking, were not available at the time the calculations were made.
Keeping that limitation in mind, the monitor reported that the basis
(the cost of getting grain from farm to port) declined slightly by
about two percent from 1999-2000 to 2000-01 for wheat and increased by
around two percent for durum.
The netback showed a significant increase in net farmer returns of
around 10 percent for wheat and 25 percent for durum, but Hemmes said
that is mainly a reflection of higher prices in 2000-01, not lower
costs.
He said the basis number will probably be a more significant number
than the netback.
“The basis is the pure number that tells you how system changes have
impacted producers’ costs,” he said. “The netback does tell you how
much more the producer was able to put in his pocket, but how much of
that was due to the price and how much was due to cost is the factor
that people will have to look at.”
Hemmes said Quorum has been working over the past few months to get as
much detailed information as possible to assist in the calculation.
Getting access to cash tickets will be a big help, and grain companies
have agreed to provide information on trucking premiums paid to
farmers. However, some potentially useful data, such as grade
promotions and discounts on farm input sales, won’t be available.
The monitor is also trying to get more information on trucking costs,
including such things as average length of haul, trucking rates and how
many producers use commercial trucking as opposed to hauling their own
grain.
