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New grain elevator builds over the past five years, why? Part I

Number crunches tell an interesting story of new facilities on the Prairies

For curiosity, I went onto the Canadian Grain Commission (CGC) website and looked up the number of primary elevators by province on the Prairies back to 2012.

I found the results interesting.

The overall capacity continued to grow even during the initial number decline, which tells me that new, larger facilities were being built while smaller ones were being shut down.

I look at the overall 2019 capacity of 7.8 million metric tonnes and think there are still at least five new facilities being built across the Prairies that are not yet included in these numbers. If we assume these new facilities are all going to average around 40,000 metric tonnes of capacity that would add an additional 200,000 tonnes of capacity, bringing the total elevator capacity on the Prairies up to eight million metric tonnes.

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Now from my days in the elevators back in 2005, when we would plan our budget for expected handlings at a 40,000-tonne concrete elevator, we planned to turn the elevator six to eight times in a year. That would calculate out to between 240,000 to 320,000 tonnes of handling per year.

My quick math would tell me with eight million metric tonnes of capacity on the Prairies, if we were to expect each facility was going to turn eight times in the year, the total grain handled would be in the 64-million metric tonne range.

I went back to the CGC website and looked up total yearly deliveries to Prairie elevators and found that in 2017/18 it was 46.279 million metric tonnes and 2018/19 it was 48.763 million metric tonnes. If I take that and divide it by the current capacity of 7.8 million metric tonnes, we get an average turn ratio of six for the past two years. That is at the bottom end of turn expectations for a facility, unless… (I will get to this later)

I returned to the CGC website and looked up historical export numbers for all grains and found in 2014 total exports were just over 40 million metric tonnes and in the past two years total exports have been between 41 and 42 million metric tonnes, so about a five per cent increase over the past five years. Not a great increase in year-over-year numbers that would inspire me to build a $20-million-plus facility, unless… (later)

Total production has not increased dramatically and total exports have not increased dramatically over the last five years, so what has inspired the grain companies to build all of these new facilities over the past five years?… (later)

Grain handling is a volume and numbers business. If they don’t handle the volume, then they need to “change the numbers” so they net out profitable in the end. But how do they do that if someone else is controlling the sales and handling fees?

For my take on what has happened and why we are seeing all of these new facilities on the Prairies, see Part II in my next article.

About the author

Columnist

Brian Wittal

Brian Wittal has 30 years of grain industry experience and currently offers market planning and marketing advice to farmers through his company Pro Com Marketing Ltd.

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