Everybody hates vested interests this year, at least in U.S. politics, it seems. Bernie and The Donald have ridden that horse pretty far.
But there are times when the vested interest is the only likely saviour for a struggling entity that needs big help.
To me, that’s the situation for the port of Churchill, Manitoba, and its role as a crop export outlet for Western Canada. Only if somebody who originates grain on the Prairies and markets it overseas runs the terminal and rail line will that sub-arctic port make any economic sense. Somebody needs to have a vested interest not just in the port and rail line, but also needs to be able to turn a buck from the grain handling and marketing.
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Right now there is the predictable set of responses to the announcement that rail line and port owner Omnitrax plans to keep the terminal shut this year. There’s anger and mean words for cold-hearted Omnitrax, the port and rail line operator. There are resolute demands that governments step in to make Churchill’s grain function survive. There is earnest talk about having indigenous groups, other northern communities, multiple layers of government and a bevy of northern businesses and industries come together, join hands and become capable railroad and port operators for one of the most challenging locations on the planet.
It’s a shock to see Churchill’s future suddenly under severe threat, but we shouldn’t be surprised. The problems are well known.
Churchill is irrelevant to 99 percent of Western Canada’s grain business, which goes out through other ports and channels, so nobody should expect farmers, farmer money, or government money that is dedicated to agriculture go towards propping up Churchill. Keeping Churchill alive has some value to a small number of farmers in northeastern Saskatchewan’s grain belt, but it’s never a factor for most farmers. The port is only open for about three months a year, points the wrong way (towards Europe), and just doesn’t have the kind of modern facilities that we see in Vancouver. (Richardson just massively expanded its terminal in Vancouver, so you can see where the smart money is being invested.) With all of Churchill’s geographical challenges, it’s hard to envision one of the big grain companies wanting to take over in Churchill and run the place.
And no one should expect locals in Churchill, or tribal councils, or a northern Chamber of Commerce to be able to sustainably operate rail, port and marketing systems in which they are amateurs. I know some want to give it a try, but I fear the consequences – for them. Those are tough businesses. CN got out of owning the rail line for a reason, which is likely the same reason Omnitrax is trying to get away. (The federal government got out a long time ago and I doubt very much it relishes the idea of diving back in.) It looks like a version of the joke about the airline industry: Question: How do you become a millionaire in the airline industry? Answer: Start out as a billionaire.
Omnitrax has been an expert operator of small scale railways, and it understands logistics, so if it can’t make a good enough go of Churchill, nobody should take the challenge lightly. But while they are good at operating rail lines and probably do a good job of running the terminal, Omnitrax doesn’t own a grain elevator or system marketing system, and that’s a critical flaw.
The place needs the terminal to be owned by somebody who originates grain on the Prairies and exports it overseas. Grain companies want to make money from taking-in the grain PLUS moving it through their terminals onto ships. It’s better yet if they also make the sales to overseas buyers that let them keep money for the grain flowing in, the grain flowing out and the sales commission. They want the full meal deal. With Churchill right now they only get one piece, so it’s no wonder almost nobody ever wants to use it. And somebody needs to want to use it for it to work.
I can’t see Churchill fitting the needs or desires of any of the big mainline players, because they want to run well-functioning grain pipelines. They don’t want to deal with muskeg, permafrost, a three-month shipping season and polar bear sightings. Or common situations like this:Â https://www.youtube.com/watch?v=EaGHTBrZO3o
But maybe there is a smaller, specialized, niche marketer that would actually be willing to deal with all of the northern port’s special challenges. Perhaps there is some element of the crops industry that could effectively use an eastward-facing, short shipping season port with an unreliable rail link. Could it be somebody in the pulse industry? Lots of their crops head to the Mediterranean, Africa and the Middle East. Maybe somebody could buy the port, load the terminal with pulse crops, build some extra storage, store more, and market in a much less just-in-time way than the rest of the Canadian industry operates. It would be an alternative marketing model, but that’s what Churchill demands.
The same could apply for durum. It goes to Europe and North Africa. Maybe somebody big into durum could collect the crop on the Prairies, ship it north, and then market it out of Churchill from August to November.
That could make sense for somebody, but who that is I have no clue about.
However, to me that seems like the only real hope for Churchill as a grain port. Only being by having it owned by somebody who actively wants to ship their own grain through Churchill will it make any economic sense. So there’s the challenge to the governments, local people and northern economic players: find that somebody.
