WINNIPEG – Last year’s transportation mess cost XCAN Grain Pool Ltd. about $5 million.
Sales were up but profits were down for the grain exporting company owned by the three prairie pools, and the reason can be summed up in one word: demurrage.
XCAN recorded a 70 percent increase in sales in 1993-94, falling just short of $1.4 billion. But consolidated net earnings for the year declined sharply to $1.8 million before patronage rebates and income tax, compared with $4.7 million the year before.
Ken Matchett, XCAN’s chief executive officer, said in an interview the decline is totally attributable to demurrage payments to vessels waiting for cargo at Vancouver and Thunder Bay.
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Since his company accounts for about half of the total trade in non-board grains and special crops, he estimated demurrage losses for all non-board shippers likely approached $10 million. The Canadian Wheat Board has not yet released its demurrage costs for 1993-94, but Matchett expects them to be huge.
Car shortages to blame
Delays of four weeks were commonplace, Matchett told delegates attending the annual meeting of Manitoba Pool Elevators, with as many as 60 vessels lined up at one time. He blamed the problems on rail car shortages, telling one farmer not to blame the 11-day strike by West Coast grain handlers in January.
And he warned delegates that the industry can’t allow such a situation to happen again.
“While demurrage bills and defaults on contracts are expensive for the trade, the damage done to Canada’s reputation as a reliable supplier of quality grains and oilseeds by a repeat of last year’s debacle could prove far costlier.”
Despite the impact of demurrage penalties on the bottom line, last year was a banner one for XCAN, Matchett said.
“With few exceptions, volumes, market shares and earnings achieved in the 1993-94 crop year represented improvement over those of the previous year and made good progress towards identified short and long term goals.”
Among highlights of his report:
- XCAN shipped 5.2 million tonnes of grains, oilseeds, special crops and by-products, an increase of 52 percent from the year before. The company paid $69 million to the three pools in handling and processing fees, up from $40 million.
- Canola shipments increased by 61 percent to 2.3 million tonnes, with sales to Japan, Europe, the U.S. and Mexico, in addition to domestic markets.
- Oats sales nearly doubled to 556,000 tonnes and country elevator market share increased significantly. Flax sales were up 27 percent to 311,000 tonnes while rye shipments declined as Canada was squeezed out of the Japanese market by European exporters.
- For board grains, XCAN shipped 487,000 tonnes of malting barley, 500,000 tonnes of wheat and barley to offshore markets and 330,000 tonnes of feed wheat and barley to the U.S. All those figures are up substantially from the previous year.
