Thursday August 21, 2014

Rail politics clogs grain movement


What has become obvious in rural Saskatchewan’s biggest problem — today’s clogged terminal/elevator system and stagnant grain movement — is that this isn’t an economic one.

Sadly, it is largely a political problem.

This doesn’t mean everything has started and ended with the current federal Conservative government and its decision to do away with the Canadian Wheat Board’s monopoly.

We still had grain transportation problems when we had the CWB monopoly … even in the days of Liberal governments.

And even if we still had a Wheat Board monopolizing wheat sales in this country, there is no guarantee that — with this year’s record crop and cold temperatures — we wouldn’t be in the same mess we are in.

But this doesn’t mean that wheat board’s demise as a monopoly has eliminated the politics in grain transportation. If anything it’s added to it.

While a monopoly wheat board may have caused marketing headaches for many farmers, the CWB did give farmers a seat at the table so that they could lobby for rail cars. Given that private grain companies now seem to be benefitting from bulging elevators and low prices, one might question whether they really want to see the current situation rectified quickly.

Some of the most insightful observations on today’s mess have come from the well-respected Mercantile Consulting Venture that noted in its newsletter last week that the actions of the railways and grain companies are resulting in things “getting worse instead of better.”

But why would things get better when today’s clogged elevators and stagnant grain shipment are so much to the advantage of both the railways and grain companies?

As Mercantile noted in its newsletter last month: “If you do not pay the railroads to move additional product, then in the end, you will pay the line elevator company instead, (via higher basis).”

Based on today’s world price of wheat, 11.2 per cent now goes to transportation, 39.5 per cent is goes to the elevator companies and a measly 49.8 per cent is left for the farmers, Mercantile estimated in its newsletter.

“We need to change the regulatory framework around the (railway duopoly),” said Mercantile partner Marlene Boersch. And in order to do so, Boersch and Mercantile have written to federal Agriculture Minister Gerry Ritz suggesting the railway revenue cap should be replaced it with a minimum grain tonnage quota that the railways are expected to move each year — starting with  39-million-tonne quota for this crop year.

But it’s also here where we run into more political problems in grain transportation.

While the Saskatchewan Party government requested the grain companies pursue service agreements and even push for non-performance penalties under the new federal legislation, the grain companies quickly made it known they had no interest in doing this.

And last week, Economy Minister Bill Boyd asked the federal government to at least oversee level-of-service negotiations between the railways and grain companies. Ritz responded by saying his federal government was “loath to regulate.”

Boersch — a former Cargill grain expert who opposes marketing boards — said this is wrong-headed approach.

“Let’s be realistic,” Boersch said. “(Government) has to do something.”

What is a “splendid” situation for railways shareholders interested in maximum share prices is a disaster for farmers, the consultant said.

But it’s also a disaster for an export nation like Canada that is now losing foreign grain markets to the U.S., which has more competition in both is grain-buying and rail industries and greater ease moving product down the Mississippi River.

And while Premier Brad Wall has even gone as far as to advocate the same north-south movement of our grain down the Mississippi, Boersch sees a better solution in rules that simply ensure rail that there is grain movement in this country.

First, though, we need to get past the politics.

Murray Mandryk has been covering provincial politics for over 22 years.



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