FOR IMMEDIATE RELEASE:
March 10, 2014
NFU says farmers bear enormous costs from Ritz’s
failure to plan
(Saskatoon, SK) – Although grain movement has been
down since the beginning of November, 2013,
Minister Ritz and Minister Raitt announced that
railways would be required to double the grain
volumes currently being shipped just as those
companies were ready to gear up anyway.
Ian McCreary, former CWB director and National
Farmers Union (NFU) member, asked “Why now? Why
wait four months to announce concrete actions that
could have been taken much earlier?“
The railways will have four weeks to ramp up to ship
a combined total of 1,000,000 metric tonnes a week
or be penalized up to $100,000 per day for non-
compliance.
McCreary describes the problems with grain
transportation as a big picture issue. “The fact is that
with no organization to hold the railways accountable
for service levels, the companies provided the amount
of service that was convenient for them.”
The transportation chaos is exactly what McCreary
warned the Conservative government about on
November 2, 2011, at the legislative committee on
Bill C-18. He clearly explained that without
mechanisms to:
“allocate the constrained capacity of the west coast
handling facility in an economic way that allowed the
optimal customers to be transferred to the other port
…, everyone is going to want to push … through the
west coast. You will have tremendous economic
pressure on the west coast."
McCreary further predicted what would happen to
grain prices when port capacity became
overburdened, saying,
“…When the export embargo by the Soviet Union
[1980] was in place, what happened to the cost of
moving grain through U.S. west coast terminals? For
those who watch markets, the difference between a
rail offer and a port offer on dark northern spring
wheat following the introduction of the freight
embargo was $3 a bushel...That's right. It was $100 a
tonne.”
It turns out that McCreary was equally correct in
predicting the direction of the price differential
between elevator and port. The CWB reported on
February 26, 2014 that farmers are receiving an
average of $4.69/bushel for wheat, and wheat at
Vancouver port has a price of 11.38/bushel. Thus,
grain companies received $6.69 per bushel ($245 per
metric tonne). Elevator company costs (freight and
elevation) are about $70 per metric tonne, leaving the
elevator with about $175 per metric tonne. By year-
end, demurrage is estimated to approach $100
million – the highest that Canada has ever paid.
However, those demurrage costs would be fully paid
for with the first 569,000 metric tonnes shipped,
which is less than one week’s grain movement.
Ken Larsen, Director of the Canadian Wheat Board
Alliance, pointed out that when Minister Ritz was
questioned about being warned about this crisis two
years earlier, Ritz answered, “We saw this coming” -
referring to his ‘Crop Logistics Working Group’. “For a
Minister and his advisors to have seen this coming
and to have done nothing until now is egregious
mismanagement,” said Larsen. “Rail transportation on
the Canadian prairies doesn’t work without healthy
government oversight, and that lack of oversight is
sinking farmers more deeply in debt.”
According to Larsen, this isn’t the first time farmers
have faced delays in getting grain to port and loaded
onto ships. “In 1997/98, the newly elected farmer-
directors of the CWB were confronted with poor grain
movement at a cost of $18.7 million in demurrage in
1996/97,” he stated. “That time, the railways pleaded
that there was snow in the mountains.”
Larsen continued, “The CWB launched a level of
service complaint with the Transport Commission and
won, then sued both CN and CP for poor
performance. CN threw in the towel and paid an
undisclosed sum and CP lost its case and had to pay
$15 million to the CWB.”
“In the following year (1998/99), however, the CWB
collected $6.6 million in despatch (net after
demurrage was paid) from ship owners because ships
were loaded more quickly than anticipated. Because
the CWB had no retained earnings, those despatch
dollars were always returned directly to farmers. The
previous year (1997/98) net despatch earnings were
$4.465 million. This trend of earning dispatch for
farmers’ benefit continued until Ritz killed the CWB,”
Larsen commented.
“Now farmers are bearing the costs of Ritz’s lack of
planning to transition the Canadian Wheat Board’s
grain transportation coordinating function to another
body. No one is in place to make sure that grain is
transported to port and available for ships to load in
an efficient and orderly way,” noted McCreary. “This is
a preventable failure, and it’s costing prairie farmers
multi-millions.”
- 30 -
For more information:
Ian McCreary, former CWB director and NFU member:
(306) 567-2099
Ken Larsen, Director, Canadian Wheat Board Alliance:
(403) 746-5792
March 10, 2014
NFU says farmers bear enormous costs from Ritz’s
failure to plan
(Saskatoon, SK) – Although grain movement has been
down since the beginning of November, 2013,
Minister Ritz and Minister Raitt announced that
railways would be required to double the grain
volumes currently being shipped just as those
companies were ready to gear up anyway.
Ian McCreary, former CWB director and National
Farmers Union (NFU) member, asked “Why now? Why
wait four months to announce concrete actions that
could have been taken much earlier?“
The railways will have four weeks to ramp up to ship
a combined total of 1,000,000 metric tonnes a week
or be penalized up to $100,000 per day for non-
compliance.
McCreary describes the problems with grain
transportation as a big picture issue. “The fact is that
with no organization to hold the railways accountable
for service levels, the companies provided the amount
of service that was convenient for them.”
The transportation chaos is exactly what McCreary
warned the Conservative government about on
November 2, 2011, at the legislative committee on
Bill C-18. He clearly explained that without
mechanisms to:
“allocate the constrained capacity of the west coast
handling facility in an economic way that allowed the
optimal customers to be transferred to the other port
…, everyone is going to want to push … through the
west coast. You will have tremendous economic
pressure on the west coast."
McCreary further predicted what would happen to
grain prices when port capacity became
overburdened, saying,
“…When the export embargo by the Soviet Union
[1980] was in place, what happened to the cost of
moving grain through U.S. west coast terminals? For
those who watch markets, the difference between a
rail offer and a port offer on dark northern spring
wheat following the introduction of the freight
embargo was $3 a bushel...That's right. It was $100 a
tonne.”
It turns out that McCreary was equally correct in
predicting the direction of the price differential
between elevator and port. The CWB reported on
February 26, 2014 that farmers are receiving an
average of $4.69/bushel for wheat, and wheat at
Vancouver port has a price of 11.38/bushel. Thus,
grain companies received $6.69 per bushel ($245 per
metric tonne). Elevator company costs (freight and
elevation) are about $70 per metric tonne, leaving the
elevator with about $175 per metric tonne. By year-
end, demurrage is estimated to approach $100
million – the highest that Canada has ever paid.
However, those demurrage costs would be fully paid
for with the first 569,000 metric tonnes shipped,
which is less than one week’s grain movement.
Ken Larsen, Director of the Canadian Wheat Board
Alliance, pointed out that when Minister Ritz was
questioned about being warned about this crisis two
years earlier, Ritz answered, “We saw this coming” -
referring to his ‘Crop Logistics Working Group’. “For a
Minister and his advisors to have seen this coming
and to have done nothing until now is egregious
mismanagement,” said Larsen. “Rail transportation on
the Canadian prairies doesn’t work without healthy
government oversight, and that lack of oversight is
sinking farmers more deeply in debt.”
According to Larsen, this isn’t the first time farmers
have faced delays in getting grain to port and loaded
onto ships. “In 1997/98, the newly elected farmer-
directors of the CWB were confronted with poor grain
movement at a cost of $18.7 million in demurrage in
1996/97,” he stated. “That time, the railways pleaded
that there was snow in the mountains.”
Larsen continued, “The CWB launched a level of
service complaint with the Transport Commission and
won, then sued both CN and CP for poor
performance. CN threw in the towel and paid an
undisclosed sum and CP lost its case and had to pay
$15 million to the CWB.”
“In the following year (1998/99), however, the CWB
collected $6.6 million in despatch (net after
demurrage was paid) from ship owners because ships
were loaded more quickly than anticipated. Because
the CWB had no retained earnings, those despatch
dollars were always returned directly to farmers. The
previous year (1997/98) net despatch earnings were
$4.465 million. This trend of earning dispatch for
farmers’ benefit continued until Ritz killed the CWB,”
Larsen commented.
“Now farmers are bearing the costs of Ritz’s lack of
planning to transition the Canadian Wheat Board’s
grain transportation coordinating function to another
body. No one is in place to make sure that grain is
transported to port and available for ships to load in
an efficient and orderly way,” noted McCreary. “This is
a preventable failure, and it’s costing prairie farmers
multi-millions.”
- 30 -
For more information:
Ian McCreary, former CWB director and NFU member:
(306) 567-2099
Ken Larsen, Director, Canadian Wheat Board Alliance:
(403) 746-5792