New transportation rules could put an additional $2 a tonne into grain
farmers’ pockets this crop year, says the Canadian Wheat Board.
“We’re looking at ending the year probably at somewhere in the $40
million range in terms of total benefits accruing from these various
sources,” said board spokesperson Rheal Cenerini.
When spread out over the board’s expected total export and domestic
shipments of 20 million tonnes of wheat and barley, it works out to $2
per tonne that will be distributed to all farmers through the pool
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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
accounts.
The savings come from a combination of three sources:
- Commercial tendering with grain companies for shipments of CWB grains.
- Freight and terminal rebates paid to the board for meeting
volume-related grain shipping targets.
- Financial penalties paid to the board by grain companies if they fail
to deliver the right amount, type and grade of grain within contractual
deadlines.
During the first nine months of the 2001-02 crop year, those savings
totalled $29.8 million.
The board won’t disclose exactly how much was generated by each of the
different sources, saying that’s commercially sensitive information.
“The agreements that have been reached with the railways and grain
companies are confidential commercial agreements and the subject of
ongoing negotiations, and so we don’t want to give out any more
information,” said Cenerini.
Some critics of the tendering system say that putting the money into
the pool accounts and sharing it among all farmers masks market signals.
For example, if the financial benefits were paid directly to farmers
who delivered grain that was shipped under the commercial tenders, that
could lead to even greater efficiencies in the system.
However, the federally appointed grain system monitor said that while
those critics may raise some valid economic arguments, there is no real
practical alternative.
“Quite frankly, the way the system is set up right now, you only have
one way of dealing with those benefits, and it is putting them through
the pool accounts,” said Mark Hemmes, president of Edmonton-based
Quorom Corp., adding it looks as if the benefits to producers this year
will be “quite handsome.”
During the three month period ending April 30, grain company tenders
for movement of CWB grains ranged from $12.20 a tonne less than the
posted rates to 13 cents above, on shipments of 1.14 million tonnes of
grain.
Tenders are expressed in relation to the board’s initial payment
in-store Vancouver or St. Lawrence, a price that includes both the
value of the grain and the handling and freight charges to get it to
port.
For example, when a company bids $5 a tonne below the initial payment,
that means it agrees to move the grain to port for $5 a tonne less than
would have been the case without tendering. Those savings go into the
pool accounts.
The majority of tendered grain moved at below the posted rates,
although bids above the rates have been accepted on a small number of
cars.
The board awards tenders on the basis of three criteria: the lowest
price; consolidating stocks to three or fewer terminals; and a
company’s track record on previous tenders.
The board is required to tender 25 percent of its total export program
this year, and 50 percent next year.
