Business model | Despite expansions, storage space at elevators will remain small compared to those in the U.S.
The end of single desk grain marketing in Canada isn’t going to turn the prairie elevator business into a carbon copy of the American model, says the country’s grain system monitor.
Mark Hemmes of Quorum Corp. said too much investment has been poured into the present prairie elevator system to allow it to suddenly transform into the American way.
“It’s a different model,” he told the Canada Grains Council annual meeting in Winnipeg.
“The two systems, while we have some similarities in what we do and what we grow, the systems themselves are too different, and I don’t think one transfers to the other.”
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Western Canada’s grain elevator system has 386 facilities with 6.7 million tonnes of storage capacity to handle 62.1 million tonnes of crop production and stocks.
The elevator system in Minnesota, the Dakotas, Montana and Wyoming has 512 facilities with 21.4 millions of tonnes of storage for an 82.4 million tonne crop.
That means that proportionally the U.S. has more than double the Canadian elevator storage capacity. It is able to hold 25 percent of the region’s crop, while the Canadian system can hold only 10 percent.
Farmers in Canada generally keep most of their crop on the farm for much of the year, while U.S. farmers move much of their crop off the farm and into the elevator system at harvest or soon after.
Hemmes said 27 prairie elevators are now boosting capacity, which will create lots of new storage. However, nothing will move the system closer to looking like the U.S. structure.
“We’re certainly not going to see a growth in the amount of storage in the country to equate with what they have in the United States,” said Hemmes.
“We’re not going to 25 percent. Nobody’s got that kind of money.”
Hemmes thinks an end to consolidation is one likely change in the Canadian elevator system. Ownership of some elevators might change, but it’s unlikely many will be shut down.
“The network that we have now is pretty much going to stay stable,” said Hemmes.
However, what will probably change is what flows through different elevators.
Most elevators were built to handle the wide range of crops that prairie farmers grow, but they will likely be altered to focus on highly efficient handling of specific crops.
“I think the days are gone where you’re going to have multi-commodity facilities,” said Hemmes.
Some elevators will focus on wheat, others will be dedicated to canola and others will focus on special crops.
