QUILL LAKE, Sask. – It costs about 20 percent more to move a tonne of grain from farm to port in the U.S. than it does in Canada, according to an unreleased study by an outside consultant.
According to figures presented by the Canadian Wheat Board at a district meeting here, the study found the average cost of moving grain from farm to export vessel was $58.06 a tonne in Canada compared to $69.40 in the U.S.
Last fall 12 grain industry organizations, including nine grain handlers, the two national railways and the wheat board, hired the national consulting firm KPMG to carry out a detailed analysis of the grain handling and transportation system.
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Grain marketing issues
The study was designed to focus on the nuts and bolts of moving grain to market, including deliveries from farms, what happens at the elevator, relations between railways and shippers and rail car allocation.
Wheat board commissioner Gordon Machej said the results will help counter criticisms that the Canadian system is inefficient and high-cost, compared to the more deregulated U.S. system.
Figures quoted by the board broke down the total cost into five categories. In three of them, the Canadian system was more expensive:
- Trucking cost an average of $4.55 a tonne in Canada compared to $3.93 in the U.S.
- Primary elevation charges averaged $9.86 in Canada versus $6.35 in the U.S.
- Terminal elevation charges averaged $10.17 in Canada compared with $3.67 in the U.S.
But those costs were outweighed by higher U.S. costs in two other categories:
- Rail transportation costs from a central location to export position averaged $31.82 in Canada versus $54.14 in the U.S.
- Marketing costs were $1.66 in Canada and $4.29 in the U.S.
(All amounts quoted are in Canadian dollars; the exchange rate used was unavailable).
Machej said the analysis does not take into account the costs associated with Canadian government ownership of rail cars, estimated at about $2.18 a tonne, or the costs of operating the bid system for rail cars in the U.S., which is around $4 a tonne.
Brian Hayward, chief executive officer of United Grain Growers and project co-ordinator for the study’s sponsors, said KPMG will present a final draft of the report at a mid-March meeting of senior executives from the grain industry.
No decision has been made on whether it will be released publicly, he added: “The collective group that owns the study has to make a decision whether to release it, shelve it, send it to Transport Canada or whatever.”
He said the study focuses on the logistics of moving grain to market on a day-to-day basis rather than broad policy issues. Nevertheless, it could be a useful document as the grain industry pursues the transportation reforms announced in last week’s federal budget.
Machej brought up the results of the KPMG study during a discussion at the district meeting about the car allocation system.
He said the board strongly supports the present car allocation system, if the alternative is a wide-open, commercially oriented bid process for rail cars. Some form of central co-ordination and management is essential to getting grain to port in a timely manner and getting the rail cars back into the country as quickly as possible.
“We’re very opposed to deregulating that part of the system,” said Machej.
