One of Canada’s grain export pipelines is being shut off until further notice.
Prince Rupert Grain Ltd. announced last week it will close its 210,000-tonne grain terminal on Ridley Island at the northwestern British Columbia port of Prince Rupert later this month.
And there’s no word on when the terminal, often described as the most efficient in Canada, will re-open.
“We have to watch very carefully crop developments through this spring and summer,” said PRG general manager Jeff Burghardt. “As we move closer to the fall we will know what the scope of operation will be for our facility.”
Read Also
Agriculture ministers agree to AgriStability changes
federal government proposed several months ago to increase the compensation rate from 80 to 90 per cent and double the maximum payment from $3 million to $6 million
He added that no consideration has been given at this point to the possibility that the terminal might not re-open next year.
This marks the second year in a row, and third in the last four, that the 14-year-old terminal has been closed down for a significant period in the spring or summer. That has raised fears in the northern B.C. community about the long-term future of grain handling at the port.
“I’m afraid that more and more, Prince Rupert is viewed as a residual port rather than a port of choice,” said Eugene Ludwick, the port’s vice-president of marketing and development.
PRG says a smaller-than-average crop in 1998, stagnant overseas markets and increased consumption of grain on the Prairies due to higher freight rates for export grain have conspired to make this the terminal’s worst year since it opened for business in 1985.
The situation is exacerbated by ongoing issues like financing costs, freight rates, taxes and port fees, all of which make Rupert a higher-cost destination for prairie grain relative to Vancouver. PRG expects to ship only about 1.1 million tonnes of grain by the time it clears out the last of its Canadian Wheat Board stocks later this month.
Shipments have averaged 4.3 million tonnes over the past five years. The previous low was 2.7 million tonnes in 1988-89, while the high was 5.3 million in 1991-92.
Shipments of the six major grains through Vancouver will be down slightly by about 1.3 million tonnes this year to around 9.9 million tonnes.
Burghardt said this year’s slowdown should send up a red flag about the future of grain movement through the West Coast.
With low commodity prices, continued economic problems in Asia, increased rail transportation costs and an emerging processing industry on the Prairies, exporting grain is not necessarily the best option any more for farmers.
“We have to be extremely concerned that over the next two to three years these types of trends could continue, and we shouldn’t take it as a given that there’s 18 or 20 million tonnes of throughput for the West Coast,” he said.
Ludwick said Rupert’s closure was expected, but it still qualifies as bad news.
While acknowledging that a lack of grain is the main reason for the early shutdown, he said the biggest issue affecting the use of the terminal is the fact that its five owners – Saskatchewan Wheat Pool, Agricore Co-operative, Cargill Ltd., United Grain Growers and James Richardson International – also own export terminals at Vancouver.
The rational decision for those companies, he said, is to ensure that more grain moves through Vancouver, where each firm keeps all of the handling revenue, rather than through PRG, where it must be split five ways.
“If you can do all of the work in the five elevators in Vancouver, then you’ll always try to minimize your costs by keeping the residual elevator shut down,” said Ludwick.
He added that if the terminal had a single owner, that company would do everything possible to maximize the amount of grain shipped through the facility.
Burghardt said any owner would look for the best rate of return and most competitive cost structure: “Our facility and our corridor does not provide that competitive alternative right now.”
Both agreed that Rupert’s advantages are masked by the concerns about freight rates, financing and taxes. There is less demurrage at Rupert, large ships that would have to visit three or four terminals in Vancouver can load in a single berthing at Rupert, and because the port is closer to Asia, there are vessel freight savings.
CWB spokesperson Deanna Allen said the board would sooner ship grain to Vancouver than Prince Rupert because of the freight differential of about $4.50 a tonne.
“We’re looking at returns to farmers and Rupert is higher cost in terms of freight,” she said, adding that the decision to close the terminal is strictly up to the owners.
