CWB still haunts Tories
Like Marley’s ghost, the Canadian Wheat Board, which was beaten up and robbed of its single-desk marketing authority and left for dead more than two years ago, keeps coming back to haunt the Harper government.
Last weekend, the Conservative government waited to the last minute to announce new minimum volumes for the railroads to avoid the catastrophic grain backlog that cost western farmers an estimated $5.1 billion during the 2013 and 2014 crop years. (That’s less than the previous estimate of $7 billion to $8 billion, but it’s still a lot of money out of farmers’ pockets.)
It’s worth remembering that the Tories had to be dragged kicking and screaming to force the railways to move minimum grain volumes last March after months of inactivity and a blasé “I’m-loath-to-regulate” attitude on the part of Agriculture Minister Gerry Ritz. When Ritz and Transport Minister Lisa Raitt finally ordered the railways to get the grain moving from elevators to port terminals, the minimum tonnage required to be moved by the two major railways was one million tonnes per week or face $100,000 per day fines. The fines were later reduced to $100,000 per week. Thus far, only one railway, CN, has been charged with failing to meet its 500,000-tonne per week minimum.
To be fair, the cabinet order and resulting legislation, the Fair Rail for Grain Farmers Act, did get the grain moving, although not enough to get rid of the record 76 million tonnes of crops from the 2013-14 crop year. In fact, with the carryover from last year’s bumper harvest of 15.4 million tonnes, combined with this year’s 56.4-million-tonne crop, the total comes to 71.8 million tonnes. That’s not that much less than the 80-million-tonne behemoth that clogged up grain bins across the Prairies, leading to the massive grain backlog of 2013-14.
And considering the new minimum volumes are significantly less than the previous 500,000-tonne minimums (in some cases as low as 200,000 tonnes and closer to 325,000 tonnes per week on average), farmers could well be facing this same shemozzle again this winter. Of course, the government is also looking at a longer-term solution to the problem of too many tonnes of grain and not enough rail capacity to move them. The Canada Transportation Act review panel is currently receiving submissions from farm groups to get the grain transportation system back on track.
A coalition of Saskatchewan producer groups is demanding more producer input into the grain transportation system to avoid a repeat of last year’s grain backlog fiasco.
Specifically, the coalition wants an “oversight body,” with producer representation, to provide direction to the grain transportation system.
The coalition is also calling for more competition among the railroads or, failing that, more regulation, a greater role of producer cars and greater transparency in the grain transportation system.
What the coalition is describing is very much the logistics co-ordination role that used to be performed by the Canadian Wheat Board in the bad old days before “marketing freedom” freed farmers from CWB’s evil monopoly, which annually marketed $5 billion or $6 billion in wheat and barley to foreign buyers like China and Japan.
This year, many of these customers purchased wheat and barley from the U.S. because of the chaos at Canada’s ports, where dozens of ships waited for grain shipments that never came or came late, resulting in millions of dollars in lost sales, demurrage charges and contract penalties for farmers. Foreign buyers are also raising concerns about Canada’s deteriorating grain quality under the new system thanks to government cutbacks to the Canadian Grain Commission.
Whether they like it or not, Harperites are being pushed to restore some of the logistics co-ordination functions of the Canadian Wheat Board and it’s not just farmers doing the pushing.
“One of the biggest root causes of the challenge we face is a lack of co-ordination across the supply chain and growing pains from new grain marketing strategies following the change in role of the Canadian Wheat Board,” CN president and CEO Claude Mongeau said this spring.
That said, you don’t have to be railway boss to know when the system has gone off the rails.