Winnipeg | Reuters — Truckloads of Canadian canola and wheat are flowing briskly into U.S. crushing plants and elevators, as Canada’s farmers seek to get round an unprecedented backlog of crops destined for ports.
A record-smashing Canadian harvest and brutal winter have overwhelmed Canadian National and Canadian Pacific Railways (CN, CP), the key links in moving western crops to ports on the Pacific Ocean, the Great Lakes and St. Lawrence Seaway.
As much as $20 billion worth of grain and oilseeds is piled up in country elevators and farm bins waiting for rail cars, limiting sales opportunities in Canada and pinching farmers’ cash flow.
Instead of waiting longer for port-bound trains, some farmers are loading trucks to buyers like Northstar Agri Industries, which crushes canola near Hallock, Minn., 40 km from the Canadian border.
Northstar has bought more Canadian canola than usual from grain handlers and farmers north of the border, CEO Neil Juhnke said.
“They’re looking for a market that has some liquidity,” he said. “In a lot of cases we’re hearing their local elevators are not receiving or are taking bids down.
“We’re well supplied through the remainder of this crop year.”
Northstar will rely on Canadian canola for as much as 65 per cent of its 420,000-tonne annual supply after heavy rain fell during last year’s planting season in parts of North Dakota.
The United States imported about 1.7 million tonnes of non-durum Canadian wheat from August through January, up one-third year over year, according to Statistics Canada data.
U.S. canola imports from Canada more than doubled in the same period to nearly 432,000 tonnes, according to StatsCan’s data, which includes Canadian exports from licensed facilities such as grain handlers as well as unlicensed sellers, such as farmers.
“Trucks are tight too”
But that surge of southbound Canadian crops hasn’t reached Legumex Walker, which usually relies mostly on rail cars of canola to supply its 367,000-tonne capacity crushing plant in Washington state.
Logistics problems have forced the company to run the plant at 60 per cent capacity this winter and just break even, said CEO Joel Horn.
Legumex has expanded the geographic area of its trucking program to pull in more canola from Western Canada and cash in on historically high crushing profit margins, Horn said.
“It’s just a matter of getting trucks, and trucks are tight too, just like rail cars,” Horn said in an interview. “If you can imagine a way (to get canola), we’re doing it.”
The Canadian government on Wednesday introduced legislation that will require each of the two major railways to move at least 500,000 tonnes of grain weekly from April to August in an effort to whittle down stocks. [Related story]
Canadian railways stopped delivering grain to the U.S. earlier this winter to focus instead on the West Coast, Agriculture Minister Gerry Ritz said in February. They have since resumed moving crops by rail to the United States, but the volume amounts only to “a little dribble,” Ritz said Thursday.
The incentive for Canadian farmers to move crops south is enormous, said Brenda Tjaden Lepp, chief analyst at FarmLink Marketing Solutions, which arranges sales for Canadian farmers with U.S. buyers. Wheat from Saskatchewan can fetch a premium of $1 to $1.50 per bushel in the U.S., she said.
Oats are also starting to move into the U.S., where there are thin supplies of oats for breakfast cereal and bars. Tjaden Lepp said one U.S. miller has for the past several weeks sent its own trucks to southern Manitoba farms to load oats.
The worst crop backlogs are in parts of Saskatchewan and in Alberta’s Peace River region, which are generally further away from U.S. markets than Manitoba farms, she said.
Until August 2012, when the Canadian government scrapped the Canadian Wheat Board’s marketing control over western wheat and barley, farmers could not have legally trucked those crops south.
The U.S. Wheat Associates, which promotes U.S. exports, supports an open border, but says grain should flow both ways. The group has asked the Canadian government for changes to its wheat variety registration system, which currently discounts U.S. wheat, said spokesman Steve Mercer.
— Rod Nickel is a Reuters correspondent based in Winnipeg.