I was convinced 20 years ago that the prairie grain elevator network was overbuilt.
In fact, I presented a tongue in cheek list when speaking at meetings. The title on the overhead projector transparency was, “Top 10 Uses for Abandoned Grain Terminals.”
You could use them as rock climbing walls, maybe mount big screens on them for drive-in movies or perhaps grind them up for gravel on roads.
Being so far from salt water, the cost of freight was going to make us uncompetitive compared to many other grain exporting nations around the world. We were going to seed more land back to grass for hay and pasture. A lot of land should never have been broken in the first place.
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Plus, more of our grain was going to be used locally to feed a growing beef herd and a burgeoning pork sector. And the grain we did grow would increasingly be specialized crops that wouldn’t be shipped through large concrete terminals.
Farmer-owned grain terminals made sense to me, and I even invested in one. But when Saskatchewan Wheat Pool launched Project Horizon and the other major companies started their building programs, I was convinced the system was being overbuilt.
Yes, wooden elevators were being decommissioned at a record pace, but look at all the inland terminals clustered at various delivery hubs. How could they all be viable?
Times were tough in the grain business and everyone was looking for solutions. I made a small investment in a desi chickpea dehulling plant, believing secondary processing was one of the answers for the farm economy.
This had to be a much smarter investment than the grain terminal. Why did I ever risk money in that stupid terminal given the state of the grain sector?
The processing facility struggled and failed over the course of a few years. Meanwhile, the shares in the grain terminal have done nothing but increase in value. Annual dividends in recent years have been more than half the value of the original shares.
That’s why most of the farmer owned terminals have been sold. Farmers, especially those in retirement or nearing retirement, looked at the tremendous return being offered on their original investment and decided it was time to cash out.
Although not at the frenetic pace of the 1990s, terminal building continues.
G3 Canada is in the game, but so are the major grain handlers as well as some players new to Western Canada. These new terminals are going up, but the decommissioning of old elevators has pretty much stopped. Storage capacity on the rail is rising.
The newest aspect of recent construction is a loop track to make loading cars much more efficient.
Despite profitable prices the past few years, the beef herd shows little sign of a major expansion. The pork sector is a shadow of its former self with massive consolidation during many years of difficult economics.
And for most of the past 10 years, the grain sector has flourished with rapidly escalating land values and the emergence of mega farms. Although there are occasional setbacks, grain production is trending upward.
So every time I feeling wise and think I can predict the major agricultural trends, I think about my list of uses for abandoned grain terminals and feel a bit contrite.
