Five months after a bitter internal struggle over its future, Weyburn Inland Terminal has cast its lot with United Grain Growers.
The two companies last week signed a deal that will result in substantial volumes of UGG grain moving through the big farmer-owned terminal.
“We felt that we had excess capacity that we could offer to someone else in a business relationship,” said Claude Carles, president and chair of WIT.
UGG will gain access to the terminal’s 78,210 tonnes of storage capacity and rail car loading efficiencies, while the terminal will earn more revenue by handling more grain.
Read Also
Agriculture ministers agree to AgriStability changes
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
“They wanted more volume and we wanted more capacity,” said UGG marketing manager Russ Jeffrey.
While there is no formal volume target in the agreement, he said UGG hopes eventually to move 100,000 to 200,000 tonnes of milling wheat and durum through the terminal annually.
Most of the grain will be trucked directly from farms to the terminal. Some may occasionally be shipped from UGG elevators in the area, but Jeffrey said it doesn’t make economic sense to pay twice for elevation and handling.
Prepare for change
Carles said the agreement will help WIT respond to possible reforms to grain handling and transportation, and reflects the idea that bigger may be better in the future.
“It’s kind of a hedge that if changes come in the future, we will be positioned to take advantage of some of these things.”
For example, if the Canadian Wheat Board was to become a port buyer of grain and issue tenders for large volumes like100,000 tonnes, WIT couldn’t bid for the whole amount by itself. But it could in concert with UGG.
The two companies would be able to put together large unit trains to take advantage of rail rate discounts for loading 50 or 100 cars for shipment to the West Coast or the United States.
However Carles also denied any suggestion that the new partnership was born out of necessity.
“We don’t see it as we had to do it,” he said. “I believe we could survive alone as well, but I guess this just opens up some more doors.”
The agreement represents the latest chapter in one of the stormiest periods in WIT’s 22-year history. Last winter, the terminal decided to seek investment from a major grain handling firm in order to ensure its survival and prosperity in an increasingly competitive grain handling industry.
That led to a proposed strategic alliance that would have seen UGG take an equity position in the farmer-owned terminal.
That precipitated a nasty battle among shareholders that was eventually won by those who wanted the company to remain an independent, farmer-owned facility.
Grain handling only
Carles said the big difference this time is that the new deal is strictly a grain handling agreement, similar to those in effect at export terminals at Vancouver and Thunder Bay.
He added that the agreement does not run for any specified length of time: “It’s an ongoing thing. We hope we can build on it and if doesn’t work, we can get out.”
