When it comes to moving grain through a cramped system, farmers and grain elevators have more control than they might realize, says a transportation manager. And a lot of it comes down to reliability.
“I want to be that preferred shipper. I want to be that farmer that when they say they need stuff moving, they know I’m reliable,” Chad Jarvis told delegates at Canadian Western Agribition’s Grain Expo. Jarvis is Cargill’s transportation manager.
Statistics Canada’s crop production numbers, released December 4, show Canadian farmers breached many previous production records. Canada’s canola yielded 18 million tonnes, up nearly 30 per cent from 2012. Wheat hit 37.5 million tonnes and oats 3.9 million tonnes. Barley yields topped 71 bushels per acre, adding up to 10.2 million tonnes. Corn and soybeans reached 14.2 million tonnes and 5.2 million tonnes respectively.
With no new mills or crushing facilities, the domestic market will only take about 20 to 25 million tonnes, Jarvis said. “So now we have, for the export orders, a 45 million tonne crop trying to squeeze through the same lines the 30 million-tonne crop would have the previous year.”
“But I think at the end of the day, it’s a good challenge to have.”
Commercial storage limited
Asked why Canadian elevators don’t pile or bunk grain in the open like Australia, Jarvis pointed out Australia has lower moisture and fewer environmental risks than Canada.
Paterson Grain has piled and tarped 40,000 tonnes of winter wheat outside its Winnipeg terminal. Jarvis said other companies are watching how Paterson’s experiment turns out.
Under the Canadian Wheat Board system, grain had to be covered, Jarvis said. The Prairie grain handling system is, in some ways, a single-desk legacy.
“The Canadian Wheat Board had a quota, they had a 25 per cent push that you go through, so it really metered out how much grain would go through the system at a time.” Jarvis said this required farmers to build on-farm storage to maintain grain quality until it could be moved.
Only about 10 per cent of Saskatchewan’s grain can be stored in the commercial system, Jarvis said. In comparison, North Dakota socks away between 40 and 45 per cent of its grain in commercial facilities, while Kansas’ commercial storage holds over 80 per cent of its grain, Jarvis said.
Though Canadian grain handling companies are building more storage, it won’t reflect the U.S. system, said Jarvis.
Grain elevators don’t fill their space right up, either. “The grain elevators start to feel full when they’re at 60 per cent full capacity,” Jarvis said.
Usually much of Saskatchewan’s wheat crop is harvested after the first killing frost, and grain elevators need to separate different products, he explained.
Shipping grain that doesn’t meet the buyers’ requirements clogs up the system.
“If you’re pouring water through a funnel, if you start to get some junk or sediment sticking to the sides of that funnel, it starts to really slow the flow. If you have sediment sticking at a deeper point or further down that funnel, it has a greater impact on the flow of water faster,” said Jarvis.
Between CPR and CNR, there are about 25,000 grain cars. The railroads tend to allocate no more than 10,000 to 11,000 cars per week to grain transport, Jarvis said. Around Christmas, grain car allocation starts dropping, and could dip to 5,000 cars per week, depending on winter weather.
It would take grain companies 14 weeks to ship out the 2013 crop if grain companies had 10,000 rail cars each week, Jarvis said. He expects to see 10,000 car programs next summer as grain companies move the remaining crop.
Railways are focused internally, trying to improve their own efficiency. For example, CNR and CPR are moving to 100 and 112 car loaders. Grain companies are responding by upgrading their facilities, Jarvis said. CNR also upgraded the track between Saskatoon and Edmonton to improve winter service.
Railways have brought in more cars this year, Jarvis said. And one railway is rewarding companies that can load cars within 16 to 24 hours by keeping a locomotive close by.
“As soon as you release your cars to the railway to pick up, they come in there, hook up, and start pulling it off to Vancouver or Thunder Bay or wherever that’s destined.”
Farmers are all too familiar with weather’s trickster nature. But rail service is vulnerable to wonky weather, too.
“We found out in Moose Jaw that rail cars make an incredible snow fence,” Jarvis said of last winter.
Steel becomes brittle in cold weather, slowing trains. And train brakes rely on air pressure. When the mercury drops, they can’t get enough air pressure to service all the brakes on the train. The railways then have to shorten trains by about 25 per cent or add a locomotive to increase air pressure, Jarvis said.
Grain-laden cars take one main rail line, owned by CNR, to Vancouver. Once emptied, they loop back on CPR’s south track. This avoids logistical problems such as passing time. But each time an avalanche hammers the tracks, trains stop until the line is cleared.
Even after rail cars have snaked through the mountains and arrived in Vancouver, weather can still wreak havoc. Cargill’s terminal sits on Vancouver’s north shore; Jarvis said they lost the equivalent of five full days to rain hours last year.
Grain companies face stiff demurrage penalties for loading delays. If a company is given a week to load a ship, and it rains for two days, they’re given nine days total to load, Jarvis explained.
“But once those nine days have come up, and you’re not finished loading that boat, it doesn’t matter how much rain you get. If it’s four days in a row of rain, you still pay that demurrage bill for those days. So it can add up pretty quickly.”
Companies such as Cargill are looking at ways to deal with rainy days, including rain shields, tarps and speeding up loading times. Loading through feeder holes, which funnel grain into ships, is also an option.
But ship captains unwilling to risk spoilage can force companies to wait for a break in the weather.
What can farmers do?
“This crop is going to impact how you move next year’s crop.” Jarvis said, adding farmers might want to consider this when contracting forward.
Much of what happens in the grain transportation system is outside farmers’ control. But farmers need to think about what is within their control to help move the crop, Jarvis said.
“Know what you have on farm. And when you’re selling and you tell us you’re going to ship something, ship what you say you’re going to ship,” Jarvis said.
By thinking of themselves as suppliers, farmers can find ways to market their grain and get it to the elevator.
For example, farmers in southern Manitoba saw rain while wheat was still in the field, leading to moisture levels of 14 to 14.5 per cent. Cargill was shipping that wheat through Thunder Bay with no issues.
Once Thunder Bay freezes, the biggest market for that grain historically has been U.S. mills, Jarvis said. “Well, the States’ mills don’t take 14, 14.5 per cent moisture. They take 13.5 per cent moisture.”
“So that might be a conversation you might have with your grain buyer or your grain company, saying ‘If I dry down my grain, is there something I can do that’s within my control that makes my grain more marketable?’” Farmers need to figure out whether the benefits outweigh the costs, Jarvis added. “That grain is going to move at some point. It’s just you’re just going to lose that opportunity through those winter months of that typical U.S. mill traffic.”
Farmers can also look at contracts that separate price and delivery. “If I get a chance to do a contract, but I don’t like the price, what options do I have to do that?” Contracts might use price floors or averaging tools to do this. Such programs can help farmers manage the risk around getting a crop out the bin and in the grain elevator, Jarvis said.
Since the single desk’s end, grain companies have been learning as they go.
And each year is different. Last year’s crop was consistent. Protein discounts and premiums were minimal, Jarvis said. This year grain companies are dealing with lower protein levels and more volatility in discounts and premiums. Farmers should work with a company with a plan, Jarvis said.
Jarvis also suggested, in a somewhat tongue-in-cheek manner, that farmers work with neighbours to keep grain flowing.
“If you get a call one time saying we need to move grain, but maybe you’re on holidays or you have some reason not to be there, go to your neighbour’s with a cup of coffee and convince him it’s time for him to move his grain. Because the reality is you both can’t move your grain at the same time and get everything through the pipe.”
Lisa Guenther is a field editor with Grainews. Contact her at [email protected]