West Central Road and Rail | New grain marketers turn to producer car loader to source grain
The introduction of a competitive marketing environment in the grain industry is providing opportunities for a Saskatchewan producer owned grain company.
Rob Lobdell, president of West Central Road and Rail (WCRR), said the transition to an open market has gone as smoothly as anyone could have expected.
The marketing landscape has changed considerably, since the CWB monopoly was ended, but there have been no significant disruptions, he said.
“There are a lot of new entrants in the business,” said Lobdell, who described the transition as the most significant the industry has seen in 65 years.
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“There are a lot of new faces, and a lot of those entities have no presence in Western Canada, so they need (access to) originating facilities. The key for us is we’ve got assets. We’ve got assets that need to be used — assets that need to be turned over — and we want to use them to aggregate grain.”
WCRR is located in a productive grain-growing area that covers thousands of square kilometres between Saskatoon and the Alberta border, which Lobdell said makes it perfectly situated to develop partnerships with those new entrants.
WCRR was formed in 1997 to prevent the abandonment of nearly 500 kilometres of Canadian National Railway branch line from Delisle, Sask., just west of Saskatoon, to Mantario, Sask., a few kilometres east of the Alberta border.
Farmers in the area initially contemplated buying the CN line to operate it themselves.
In addition to obvious concerns about moving grain to market, rural residents also feared that schools, businesses and families would soon follow suit if the railway disappeared.
The group eventually reviewed its priorities and options and approached CN with a case for maintaining the line.
A key element of the plan was a commitment by farmer-organizers to aggregate and load locally produced grain through a series of modern, efficient, farmer-controlled producer car loading facilities.
By taking control of grain collection and car loading, producers could help the railway reduce its operating costs while ensuring that area crops would still be moved on CN tracks rather than on its competitor’s, Canadian Pacific Railway.
The plan made sense to CN.
Political pressure to maintain rail services in rural Saskatchewan also served as a catalyst.
Not long after, WCRR was born.
An initial share offering targeting local farmers raised $1 million in start-up capital.
Construction on the company’s first producer car loading site followed two years later.
CN has since sold the branch line to Big Sky Rail Corp., one of a dozen or so short-line railway companies operating in Saskatchewan.
Big Sky provides train service, including car spotting from CN rail yards in Saskatoon to WCRR loading sites.
WCRR started with a single facility at Eston, Sask., and has since expanded to include producer car loading facilities in Beechy, Lucky Lake, Dinsmore and Laporte.
Plans are in place to develop a sixth location at Elrose, Sask., but timelines for it are not yet final.
Each facility in the WCRR network is built on a similar model, combining a 34-car siding with on-site storage of 3,000 tonnes.
At full capacity, each site stores enough grain to fill one 34-car spot, or one-third of a 100-car grain train.
The Eston facility cost $2.5 million. Today, the same facility would cost $4 million.
Lobdell said dedicated local staff, modern facilities and a loyal producer base are keys to the company’s success. Farmers in the company’s catchment area produce as much as 700,000 tonnes of grain per year.
WCRR doesn’t source all of that grain.
Delivery incentives offered by competing grain companies on CN’s Rosetown main line — about 40 km to the north — and CP’s Regina to Swift Current line — roughly an hour’s drive south — also attract local grain.
However, WCRR is easily the most visible buyer, accumulating the vast majority of grain produced in the region.
Modern facilities and automated processes at WCRR have reduced operating costs and enabled the company to offer competitive marketing options to local growers.
Systems are in place that allow WCRR to monitor the quality and quantity of on-farm grain stocks.
Computer programs use the data and monitor markets to identify the most profitable blending and marketing opportunities.
Together, the systems enable the company to efficiently manage local grain supplies while offering competitive returns to customers.
“We’ve got a strong customer base, we’ve got volume, we have quality control systems and we have very efficient processes. That’s what we offer,” said Lobdell.
“People and companies that are new to the industry are looking to us to provide service as a grain aggregator. Those new players don’t have any assets … so their job is to find someone who can aggregate grain in the country, and someone on the port side as well, to handle that grain.”
He said changes during the past year have forced all players in the Western Canadian grain industry to be efficient and responsive to market needs.
For WCRR, that meant developing new relationships, maintaining beneficial arrangements and identifying new opportunities in aggregation and merchandising.
Lobdell said the new environment has presented challenges and opportunities for a small independent competing with established and well-capitalized line companies.
WCRR’s role will evolve, he added, but its strengths will always be based in grain origination and transloading, which are the functions on which the company was founded.
“Every one of the companies, big and small, had to be responsive,” Lobdell said.
