West Coast Grain Non-movement

[Kasro]

Can anyone venture an answer to these questions?

1. How much extra is it costing to divert what would be normal Vancouver grain exports?

2. How long will Rupert ship now that the injuction against pickets there has been lifted?

3. If Vancouver went back to business, how much, if any, would it add to our canola prices?

4. Would we see the PRO's go up if Vancouver went back to work, or are they already distorted higher due to director elections? (Ignore the the last part of this question please, unless it is a short comment or real information. I want analysis. Believe me, I know the CWB is 100% capable of distorting truth and facts, including probably in the PRO.)

[chaffmeister]

I'll give my two-cents worth:

1. How much extra is it costing to divert what would be normal Vancouver grain exports?

Prince Rupert has about $3.00 per tonne higher rail costs. Offshore freight etc about the same as from Vancouver. We're also seeing grain move through Thunder Bay that wouldn't normally - no idea how much CWB, etc would have to discount typical west coast fob prices to get a customer to go to Thunder Bay.

Another way to look at this is to consider how much the "system" is saving by keeping Vancouver closed. By locking out the union, the terminal operators have side-stepped huge operating costs (they don't pay wages when they've locked them out) in a year when the projected export volumes were around 50% of normal. In fact, Prince Rupert can likely handle all the anticipated volume for this year - if it's allowed to stay open.

2. How long will Rupert ship now that the injuction against pickets there has been lifted?

Word is that the union is setting up "informational" pickets, whatever they are. I'm told the union boys up there (including the CGC inspectors) are not expected to cross. That will shut down PRG completely.

3. If Vancouver went back to business, how much, if any, would it add to our canola prices?

This is an interesting one - believe it or not, canola exports are right on pace to hit the 2 mmt mark that most pundits are projecting. All you need to get there is just under 40,000 tonnes a week and that's pretty much what we're seeing. However, now without Rupert, this number will be tough to maintain and that's not good for prices. By the way, crush is on pace as well and crush margins are quite good.

Perhaps a bigger issue is farm delivery into the system relative to other years. At this time of year, typical inventory levels in the system are around 12% of the total supply. This year, we're sitting at over 20% - that's over 20% of the TOTAL supply, sitting in the system !! This is about 25% of the total demand - 3 months worth !! Put another way, if farmers decided to deliver no more canola, there is enough in the system to supply both exports and domestic crush until the end of Dec - and still leave some left. (And it gets worse if nothing can get shipped out of the west coast.)

Farmers have been taking advantage of high flat prices and buyers have widened out their basis levels to cover the cost of holding this inventory. This is why cash basis levels remain
"sloppy" and intermonth spreads are showing wide carrying charges.

Now - to answer your question. If Vancouver went back to business I think you would see the market pop higher, particularly the front months and cash basis levels would improve. By how much? Sorry, I'm not that kind of guru. But I will say that I think that there are more fireworks to come - but we have to get canola moving offshore before we get there.

4. Would we see the PRO's go up if Vancouver went back to work?

Sorry, this one is out of my realm. Predicting grain markets is much easier than trying to predict CWB PROs which are peppered with interest allocations, CWB "policy", sales performance, sales timing, etc.

[TOM4CWB]

Chaffmeister;

Do you think that the facilities like Vancouver Warves have done a reasonable job at loading ships, and are these people still able to keep loading ships today?

Very insightful comments...

Does the use of the CGC inspection and grading of western export grain remain a requirement for shipping through Vancouver Warves?

Has Board grain moved through Vancouver Warves?

[chaffmeister]

Tom4CWB:

Van Wharves and Neptune have continued to load canola and special crops (peas) even during the lock out. I don't know if they have loaded any CWB grains. They don't have much storage and so most is on a direct hit basis.

"Does the use of the CGC inspection and grading of western export grain remain a requirement for shipping through Vancouver Warves?"

I'm not sure but I believe it is a requirement.