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f you were asked to picture a Canadian farmer selling
grain, you might imagine a truck, loaded up at the farm,
headed for the local elevator.
That mental image remained more or less accurate until a
couple of years ago—specifically, until Aug. 1, 2012, when the
Canadian Wheat Board lost its role as the sole buyer of wheat
and barley in Canada.
Now, Canadian farmers have to decide not only to whom
they’ll sell their grain, but also when they’ll sell it, said
independent agricultural consultant Russ Crawford.
“A farmer has multiple choices to make at harvest,” said
Crawford. “Do I store the grain in a bin on the farm? Do I take
it to the elevator? Is there a better deal going directly to a
processor, such as a malting company or a canola crusher?
Do I go to a domestic end-user, somebody who’s going to
consume the grain—which, in the case of barley, would be a
feedlot?”
If grain marketing were a board game, the players could push
their pieces along any number of different paths. They could
even go down one path now, and a different one later.
In 2012, the first harvest year under the new rules, all the
players seemed to come out ahead, no matter which paths they
chose. Grain prices held high, and the transportation system
had plenty of capacity to handle the harvest.
“It was like the sun, moon and stars all lined up to make for a
perfect introduction to the new marketing system,” said Mark
Hemmes, whose Quorum Corporation monitors Canada’s
grain handling and transportation system on behalf of the
federal government.
Hemmes said most farmers did well—even those who made
a few mistakes along the way.
“At the end of the year, we had a 4.9-million-tonne carryout,
which is very low. That says we moved a lot of grain, and it was
all at really good prices.”
In year two, however, the game became much trickier—
largely because of 2013’s record-breaking harvest. Farmers
produced more grain than the railways could handle, said
Hemmes.
“The capacity the railways offered was sufficient to move
what was there last year. This year, it’s not even close, because
it’s such a big crop.”
In addition to the size of the crop, weather issues made it
nearly impossible for the railways to gear up grain transportation.
“In mid-September to the end of November, CN
performed very well,” said Mark Hallman, CN’s director of
communications and public affairs. “Then the extreme cold
set in during early December and that has been a major factor
for us since that time.”
Hallman said this winter is the second coldest on record,
the chilliest since 1949, affecting major Prairie routes. Cold
air forces CN to run shorter trains while more cars sit in yards,
reducing overall capacity for grain and other commodities.
“When the cold abates, we should be able to push through
5,300 hopper cars, which we were achieving during October
and November of both 2012 and 2013,” said Hallman. “When
the weather breaks, we’ll be aggressively back there.”
The situation left many producers holding tonnes of grain in
on-farm storage, watching helplessly as market prices spiralled
downward.
“Last year, we had this really strong market, where prices held
high,” Hemmes said. “This year, we started high, back in the
spring, and it’s just been falling ever since.”
Farmers who haven’t already contracted buyers for that grain
now find themselves in a bind.
“They’re worried because they don’t have cash flow, and they
can’t deliver because the capacity isn’t there in the system.”
In short, many farmers find themselves struggling to play a
game they never signed up for.
“Guys are wandering around Saskatoon at the Crop
Production Week, trying to figure out the smart thing to plant,”
explained Crawford. “Where are the premiums going to be,
and where are the shipping opportunities going to be? They
didn’t have to ask those questions a year or more ago.”
Increasingly, those farmers are seeking outside advice, said
Crawford.
“You see a surge in marketing advisory services now—
companies saying, ‘I’ll help you market your grain. I’ll provide
you with market insights.’ Farmers are signing up for these
because they need help.”
A boost in railway capacity would solve some of the
challenges facing grain farmers. But that’s no easy fix, said
Hemmes.
“It’s not as simple as saying, ‘Well, let’s go and get a bunch of
rail cars and put them in place.’ You need the resources to move
them—locomotives and crews.”
Crawford remains optimistic that farmers will develop the
skills they need as the system continues to evolve.
“They need to understand how they can capture
opportunity,” he said. “How can I make this an opportunity for
me rather than a negative influence?”
Spring
2014
grainswest.com
23
THE
GRAINGAME
Record crop leads to transportation
and cash-flow issues
STORY by Scott Rollans • Illustration by tommy wilson
Feature