Saturday November 22, 2014




Bumper crop woes: Getting the grain gone

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Saskatchewan enjoyed a bumper crop this year, but there are issues getting all that grain to market.

The largest crop in Saskatchewan's history has resulted in a backlog of shipments, an overflow of grains at the elevator level, and farmers being forced to store them on the ground.


"We've had a 33 per cent increase since last year," said Wade Sobkowich, executive director for the Western Grain Elevator Association. "We're moving about the same, maybe slightly more grain as compared to the same time last year."


In other words, even though the amount of grain has gone up, the shipment of it hasn't been any faster than last year.

Thus far, this has resulted in a pileup of grain at the elevator level and has forced farmers to store grain any way they can until it can be shipped.


According to Sobkowich, this is because the Canadian National Railway Company (CN) is reluctant to invest in surge capacity, which would mean more locomotives, more trains, and more people.


"They'd rather take the total crop for the year and average it out for the year," he said, "but that doesn't work for us because if the prices are good, we want to take advantage."


CN's order book report shows that for grain week 19, only about one-third of their orders are planned or confirmed. Any orders they take that haven't been shipped yet get pushed forward to the next week.


According to Sobkowich, this is due to their system of trying to space out shipments, which is why grain is not getting shipped out to the vessels at ports any faster.


"We have competing objectives. If the prices remain flat, it affects the bottom line," said Sobkowich. "We want to move it when we want it because we want premium prices."


However, according to Mark Hallman, director of communications and public affairs for CN Rail, the situation isn't quite so simple. It's not about CN's performance; it's about the fact that moving the largest grain crop in history in three months is "not physically possible."


"Throwing more hopper cars into the supply chain will not work," said Hallman. "It's like morning rush hour on a freeway. You put too many cars on the road, the road plugs, and everything slows to a crawl. It's no different with the grain supply chain."


Sobkowich, however, disagrees. He doesn't believe the railways are at full capacity yet, at least not to the point where adding more rail cars would be added congestion.


"It doesn't make sense because when you take a look at grain shipping in previous years, they were providing less cars and still had the ability to top that up," he said. "We've also been trying to get shipping to the United States and Mexico, but there are no grain cars on the railways to those locations either. How is it they have the ability to ship service for oil and gas, but not grain?"


Despite his arguments, CN believes more effort must be put into making the supply chain more efficient.


"The entire grain supply chain, from railways, country elevators to ocean terminals, must collaborate closely to maximize the flow of grain to the ports by keeping hopper cars moving on a consistent basis," said Hallman. "CN is doing its part.

The company has invested hundreds of millions of dollars in its network to speed the flow of traffic on its system."


In the meantime, farmers are being forced to wait and store the grain on their farms until it can be bought. Ideally, the cold weather should work well for them as long as they can keep conditions dry. If they can, the grain will keep indefinitely.


The problem is farmers are running out of room and have started storing the grain in machine sheds or on the ground. In these situations, if it gets out of condition and starts heating up or is subjected to the elements, the grains might start to sprout or grow mildew.


"If you can get the bags to store them, they can last indefinitely," said Sobkowich. "They can be hard to find depending on the time of year. You just unroll the bags, and they're like long burms full of grain."


Fortunately, the backup of grain shipments probably won't affect the international market prices. Usually, an overabundance of product like this could flood the markets and bring the prices down. However, because there are many subcomponents to what's happening elsewhere, prices may stay the same.


"There are various Canadian classes of wheat being used by other countries," said Sobkowich. "They need different varieties and classes. Many times, it's a Canadian class and they still want the product (despite the price)."


Nevertheless, the problem of shipment still remains. Unless the elevator association is able to get grain shipped, they will be unable to get a decent price.


"Even if they still want that product, we can't get it onto the vessels anyways," said Sobkowich. "When they're taking a look at what prices to offer farmers, they're looking at what's available. If we're not asking for it, we're not sending a very good price signal."


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