SASKATOON (Staff) — A proposal to dole out rail cars to shippers on the basis of their historical shares of the market is a temporary compromise that no one really likes, say industry officials.
The new system, in place for this crop year only, is designed to provide shippers with more reliable advance information about rail-car supplies so they can plan their sales programs accordingly.
Transportation planners say that should prevent a repeat of last year’s transportation mess, when cars were allocated on the basis of sales and some companies purposely oversold in order to get more cars.
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When the proposal was first sent out to the industry for comment Aug. 12, it was strongly criticized by small grain shippers, who say they were being effectively shut out of the market.
“It’s very disturbing to us,” said Rob Dzisiak, vice president of Benson-Quinn Commodities Inc. “It would basically handcuff our ability to fulfill our existing obligations and to expand our business at all.”
Under the proposal, five percent of the weekly car supply for non-board grains would be set aside for “new entrants” with no historical market share.
In shippers’ self-interest
Kevin Chester, vice-president for marketing and transportation at Stow Agro, said the new plan was cooked up by the big grain shippers to protect their own interests.
“It forms a cartel and that’s not good for the producer,” he said.
The committee, that spent three months coming up with the proposal, was made up of representatives from the six major grain companies, the Canadian Wheat Board and the two national railways.
Bruce McFadden, of the Grain Transportation Agency which chaired the meetings, said small shippers’ concerns will be taken into account before a final decision is made, but added there is “no perfect solution.”
Even those grain company officials who drafted the plan say they don’t really like it, especially the idea of tying car allocations to historical market shares.
“Every single one of us had problems with that,” said Richard Wansbutter, director of marketing and transportation services for Saskatchewan Wheat Pool.
Problems arose because the deal flies in the face of the push for increased competition and deregulation in the grain industry.
But something had to be done, he said, and no one could come up with a better idea. He emphasized it’s only a temporary measure: “We would not support this going beyond the stated one year.”
Tom Cascisa, transportation manager for Cargill Ltd., said while the large companies are ready to sit down with the small shippers and discuss their concerns, they may actually be better off under this plan. Last year the car shortage forced many small shippers out of the market, but under this proposal they are guaranteed five percent of the cars. And he added the small shippers aren’t the only ones who may lose sales.
“No, they won’t be able to fill all their needs (for cars), but neither will the large shippers,” he said.
