Penalties possible | Under the CWB, producer car shipments with off-spec grain were blended but tolerance levels will tighten after Aug. 1
Farmers who ship grain on producer cars should expect to be held to a higher level of accountability after Aug. 1.
Murdoch MacKay, chair of a committee examining the future role of short-line railways and producer cars in Western Canada, says producer cars will likely remain a popular shipping option for prairie farmers after single desk grain marketing this summer.
However, the quality of grain delivered on producer cars will face greater scrutiny in the new marketing environment, he added.
“Producers (who) … ship producer cars will have to ship what they say they’re going to ship and if they don’t, there will be penalties that will be assessed,” said MacKay.
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“Those penalties could be assessed not just for a downgrade (where grain quality falls short of the stated grade) … but there could also be penalties assessed if (grade) affects the timing of a shipment or the loading of a vessel.”
As a single desk seller, the CWB had the ability to accommodate off-spec grain shipments that arrived at port on producer cars.
Producer car grain that failed to meet grade could be blended with other grain inventories without affecting the overall quality of grain on outbound vessels.
But after Aug. 1, the CWB will be handling smaller grain volumes and will likely have fewer opportunities to blend off lower grades at port.
Mark Thibeault, manager of supply optimization with the CWB, said grain shipped on producer cars will continue to be an important part of the CWB’s grain business after Aug. 1.
However, he said there will be a smaller margin for error when it comes to producer car shipments.
“Our objectives … are to promote and facilitate as much movement on producer cars as we can,” Thibeault said.
“We want to try to reduce costs (but) … we need to ensure that they (producer car shipments) are executed smoothly.”
MacKay said there will also be greater onus on producer car shippers to ensure grain moves through the system as efficiently as possible.
Shippers who co-ordinate large unit trains of 50 or 100 cars will have a much greater chance of negotiating handling and sales agreements with the CWB and other grain companies, he added.
“Producer car shippers may have to work together and look at shipping larger units because they will ultimately be dealing with companies that are looking to add significant volumes of grain in order to fill a sales commitment,” MacKay said.
“If you can put together a large block of cars, then it will be much more appealing to a (company) out there that’s looking at buying grain. It’s a new world and people are going to have to look at doing things a little bit differently.”
Bill Woods, a former CWB director and producer car shipper from Eston, Sask., agreed that tolerance levels for producer car grain will be tightened after Aug. 1.
He also pointed to a variety of other issues that could affect producer car shipments, including the terms of grain handling agreements that are negotiated between the CWB and Canadian elevator companies and the number of agreements that are concluded.
The CWB has reached handling agreements with only two grain companies: Cargill and the South West Terminal.
Woods said elevator companies that make money from receiving and elevating grain and loading rail cars will be less inclined to negotiate deals with the CWB if it is viewed as an advocate of producer car loading.
Prairie farmers are on pace to load 12,500 producer cars in 2011-12.
If that happens, elevator companies could miss out more than $10 million worth of handling and elevation tariffs.
