Thunder Bay terminal | Ocean freight rates forced more grain west
Canada’s top handler of producer cars says the amount of producer car grain it receives at its export terminal in Thunder Bay was down 20 to 25 percent in 2012-13.
Nonetheless, Mission Terminal Inc. still sees a bright future in the producer car business, said Derek Drayson, the company’s grain merchant and business development expert.
“I’m a bit more confident than most people are that producer cars can continue to function and continue to provide value in the new environment,” he said.
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The reduction in producer car volumes in the 2012-13 crop year wasn’t necessarily caused by changes to the western Canadian grain marketing system that took effect last August, Drayson added.
A bigger factor was ocean freight rates, which caused significantly larger volumes of prairie grain to move west, particularly durum.
“I’d say our producer car volumes were down about 20 to 25 percent, but I wouldn’t say that’s totally a product of us switching into the new (grain marketing) environment,” he said.
“I’d say it’s largely a product of a lot of short covering at harvest time this year … and of the West Coast basis on durum as well. As ocean freight rates (adjust), I think things will stabilize again.”
Drayson said competitive ocean freight rates have caused a significant shift in grain movement patterns during the past 12 months.
Durum shipments through West Coast terminals were particularly high in 2012-13 with total durum volumes through Vancouver expected to be up more than 100 percent from the previous crop year.
“Things were more economical to move all the way around South America to market rather than going (through Thunder Bay),” Drayson said.
“Durum volumes are almost double through the West Coast this year. I think they’ll probably end up at 1.2 or 1.3 million tonnes through the West Coast, and that’s typically not the case.”
According to statistics from the Canadian Grain Commission, the five-year average for West Coast durum, including shipments through Vancouver and Prince Rupert, is around 500,000 tonnes.
Mission Terminal normally handles more producer car grain than other terminal operators.
Producer cars normally account for 25 percent of the MTI’s overall grain volumes at Thunder Bay.
In an average year, the company expects to handle 40 to 50 percent of all grain shipped on producer cars.
To maintain those volumes, the company recently hired a Saskatchewan representative to act as a liaison between it and producer car loading sites.
This month, Mission will also launch a marketing app for iPhone users, allowing producers to select a crop type, choose a delivery location and acquire instant information on pricing and contract opportunities.
The company has also retained shipping incentives of $3.50 per tonne on all CWB grain, minus a $1 per tonne administration charge.
A few years ago, Mission officials announced plans to expand the company’s grain handling assets in Western Canada by acquiring existing primary elevators or building new ones.
In addition to its 136,000 tonne terminal at Thunder Bay, MTI also owns a 6,000 tonne elevator at Alexander, Man., and has equity in three producer car loading facilities in Saskatchewan and Manitoba.
It also has a minor equity in the Great Sandhills Terminal at Leader, Sask., and is a shareholder in several short-line railway companies in Sask-atchewan and Manitoba.
Drayson declined to say whether the company still intends to expand its prairie assets.
“Really, you’re looking at things in a different light than you were before,” he said.
“The way you analyze these types of investments needs to change a bit.”
As of early July, producer car shipments in 2012-13 were down almost 40 percent from the previous year, according to the CGC figures.
As of July 10, the number of hopper cars filled by grain growers stood at 8,487, down from 13,038 a year earlier.
Despite the reduction, federal agriculture minister Gerry Ritz said there is no reason to believe the system is broken.
Instead, the lower numbers suggest farmers have found more appealing ways to ship their grain.
“The cars are still there should producers choose to use them,” Ritz said.
“But if they choose not to use them, I’m not going to force them on it.”
