Logistics – How the Wheat Board did it
In a system that has to move around 400,000 grain cars a year with each containing identity preserved wheat or barley, there is no room for error or shortfall when grain ships are waiting at a cost of thousands of dollars a day – a cost which is ultimately paid by farmers.
At the end of January 2014 there were around 40 ships waiting at Vancouver. Demurrage on the larger ships, according to the Ritz controlled CWB, would amount to half a million dollars per month – all out of farmers’ pockets.
When the single desk CWB made a sale, it then arranged shipments from in-country to the consumer’s destination port facility. The CWB called on farmers to deliver the grade and type of grain customers wanted to the inland elevators, and then arranged rail delivery to the right Canadian port terminal.
In its 2011 publication Dismantling the CWB, What’s at stake the farmer-controlled CWB said this about its role in transportation:
“The CWB manages a supply chain that extends from farm gate to end-use customer. It has an envied international reputation for consistent quality and supply, superior service and technical support.”
This is a nice way of saying when the CWB had the single desk it had de facto management of the port terminals on wheat and barley. It is not widely known that the CWB often matched the grain ship to the customer’s terminal since not all over-seas terminals can handle all ships. It also made room in the system for canola and reserved space for pulses at the beginning of each crop year. Now this orderly marketing is all gone and grain prices have fallen by at least half at the farm gate.
Logistics – How the private trade does it
For 100%of the grain moving off the prairies in the 2013/14 crop year, the private trade is in charge and they are much more interested in flipping and handling the grain than meeting customer demand; hence the complaints from the Chinese and Japanese food agencies about poor quality and customer service.
The port terminals are competing with each other for handling. This means they are grabbing rail shipping capacity and having grain delivered without considering demand. The result is ships wanting a specific grade of grain have to wait longer. The single-desk CWB used to make sure the right amount and type of grain was at the port when the ship needing it arrived.
That just does not happen now that the private trade is running the show simply because they don’t really care about demurrage. They make their money flipping grain and charging handling fees. They just add any extra costs to the basis they charge to farmers. Ditto for the extra costs of shunting rail car loads between CN and CP lines. As has been pointed out: “The end result is too many ships waiting much too long and that means farmers get less money.”
Effectively this means that without the single desk we now have a system which is volume, not customer and quality oriented. Minister Ritz threw away our quality based niche market with its price premiums when he killed the Wheat Board. It also means that other aspects of orderly marketing are gone so everybody is trying to get through the door at once which is a great boon to short sellers.