The Prince Rupert, B.C., grain terminal is closing for the summer.
Blaming a lack of export grain and high operating costs, Prince Rupert Grain Ltd. announced last week it would stop receiving grain June 22.
“There is not enough grain left in prairie farmers’ bins to keep all west coast grain export facilities operating,” said Jeff Burghardt, general manager of PRG.
An estimated 87 percent of western Canada’s exportable supplies of the six major grains and oilseeds had been shipped to customers by the end of May, leaving little grain to be moved until the new crop comes off.
Read Also
Increasing farmland prices blamed on investors
a major tax and financial services firm says investors are driving up the value of farmland, preventing young farmers from entering the business. Robert Andjelic said that is bullshit.
The PRG terminal usually handles 400,000 to 500,000 tonnes of grain a month, but the outlook for June, July and August calls for monthly shipments of about 160,000 tonnes.
“We just can’t afford to keep operating with those kind of numbers,” Burghardt said in an interview.
While a shortage of grain is the immediate cause for the shutdown, terminal officials say that situation is exacerbated by high operating costs that have plagued the port for years, ranging from taxes and port fees to financing costs and freight rates.
“We’re frustrated, concerned and disappointed with the lack of progress on these competitive issues,” Burghardt said. “There is an awful lot of potential in this corridor and this facility.”
This marks the second time in three years that the facility has shut down due to lack of grain. The terminal was closed for 10 weeks in the summer of 1996.
Grain already in storage at the terminal will be shipped out throughout July. The facility will re-open this fall, but the date will be determined by when this year’s crop starts moving to export markets.
Alberta Wheat Pool president Alex Graham said it’s ironic that the PRG terminal has to be closed when there is so much emphasis on improving system efficiency.
“It’s the best terminal on the west coast for sure, in terms of modernization, technology, capacity, and so on,” he said. “But in the current circumstances, Prince Rupert becomes a residual port.”
With the volume and earnings outlook so bleak for the next few months, the owners (a consortium of the six major grain handling companies) said they had no choice but to consolidate activities at terminals they own at Vancouver and Thunder Bay, Ont.
“Obviously you shut down the facility that’s creating the least profitability for western Canadian farmers,” Graham said.
While PRG officials said the shutdown is strictly a business decision, they also hope it will send a message to other industry stakeholders about the need to deal with costs.
“If they want that port to run 12 months of the year, we really need some desire to solve some of those issues,” said Graham. “It has become a very expensive place to do business. It was not originally that way, nor was it intended to be that way.”
Mary Jane Skulski of CN Rail said the railway is prepared to talk about ways to improve the economics of using Prince Rupert. “We are open to discussions with other stakeholders for long-term solutions.”
The freight rate to Prince Rupert is about $4 to $5 a tonne higher than to Vancouver. While programs have been employed to reduce that disparity, the port is at a clear disadvantage, said Burghardt.
PRG will handle about 4.1 million tonnes of grain this crop year, compared with the five-year average of 4.4 million.
Canadian Wheat Board spokesperson Rhea Yates said the board isn’t surprised by the news, given the meagre outlook for grain shipments over the next three months.
“We respect the decision and we’ll work with the industry, with the ports that are available,” she said, adding the closure shouldn’t cause problems for board customers.
About half the terminal’s 100 employees will be laid off this month, with more layoffs possible in July.
