WINNIPEG — Has the free market collided with a regulated transportation system or was this year’s grain export fiasco created by a series of abnormal events?
Time is money, and it cost big money to get grain offshore this year.
Trade observers estimate canola prices would be $3 to $5 higher if there were no transportation delays. The Canadian Wheat Board pool accounts are taking a direct hit — about $10,500 per day for every ship waiting to load board grains at the West Coast.
On open market grains, companies are absorbing the costs. Most of their sales were locked in long before delivery problems began. Everyone shares this indirect cost.
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It has prompted many in the industry to call for a full scale review of the rail car allocation system with a view to making it more accountable and responsive to market trends.
Is this year a sign of things to come?
Industry sources say the overriding factor creating the current capacity shortfall has been the surge of exports — predominantly CWB grains –Êinto the U.S. market.
That factor combined with an overall shortage of lease rail cars, an increase in special crops, a prolonged winter cold snap and a 12- day strike at the West Coast to create the current situation.
U.S. shipments move at commercial freight rates and until recently, U.S. allocations came off the top of Grain Transportation Agency weekly car allocations.
Yet the turnaround time into the U.S. can be double that of delivery to a Canadian port.
One trader estimates, “if you’ve got one-third of your fleet tied up in deliveries that take twice as much time, it reduces your export potential by 15 percent.”
The U.S. market has been a growing one for Canada’s canola, high quality wheat, durum and malting barley. But it’s questionable whether this year’s surge in movement is indicative of a market trend.
After all, during the past two years the U.S. government has used export subsidies to deplete its domestic durum supplies to the point where it must import to keep pasta mills churning.
A large Canadian crop of feed wheat coupled with high U.S. corn prices due to last year’s floods, has made feed wheat unusually competitive in the U.S. market this year. Much of the 975,000 tonnes of wheat Canada has exported to the U.S. so far this year has been feed quality.
