Churchill - Western Canadian Grain Transport

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Churchill and Western Canadian Grain Transport

The Canadian Wheat Board is the primary marketing agency for Western Canadian farmers, and it has always sent a percentage of its grain sales overseas via the Port of Churchill. That could change, however, if the Conservative government of Steven Harper has its way. Keep abreast of the news to see what impact government decisions could have on Churchill’s future.

Bill Nicholson, CWB Director, for District 9, Shoal Lake, wrote an interesting letter to the Winnipeg Free Press on the above date. Enemies of the Canadian Wheat Board have long wanted to dismantle this farmer-controlled marketing agency, claiming that it denies farmers the choice to market their grain as they see fit. This argument sounds good on the surface, because everyone wants the freedom to choose. However, the problem is that it makes each farmer his own marketing agent. As prairie people have long known, a single individual has little clout, but a group of individuals gets noticed. In its role as a collective bargaining agent for farmers, the Canadian Wheat Board has done a good job. It is true that there have been times, when an individual could have received more for his grain elsewhere, but in the long run the Wheat Board has negotiated the best collective results for prairie farmers. This success rate has not gone unchallenged from powerful forces that could benefit from the dismantling of the wheat board. Indeed, United States lobbyists representing multinational grain interests have challenged the CWB’s’ “monopoly” no less than eleven times and have been defeated each time according to international trade law. This should have been a signal to all Canadian politicians that the CWB is worth preserving, but self-serving, special interest groups have infiltrated the Conservative Party, which has had a long and close association with Western Canadian farmers. Now the CWB is under attack, and farmers who voted Conservative in recent elections feel betrayed.

Bill Nicholson is not taking this attack lying down. He pointed out in his letter that farmers have chosen directors in five consecutive elections who believe that single desk selling enhances the market power of farmers. In other words, farmers have voted to keep the single desk system. The system has worked. Using barley as an example, Nicholson added that the CWB negotiates the highest possible price for domestic malting barley, export malt, export malting barley, and feed barley. He noted that independent studies prove that the single desk selling of barley provided a “net benefit of $59 million annually.” For cash-strapped farm farmers, that meant something.

Nicholson also went on to say that the CWB also “invests substantial time and money in market development and analysis, and claimed that this would not happen “without the single desk.” [Does anyone in their right mind think that individual farmers could do this on their own?] In Nicholson’s view, “ At the same time as large grain companies are merging to increase their market power and shareholder returns, the notion that farmers would be better off competing against each other to sell to fewer and larger companies doesn't fit any rational economic theory.”

As Northern Manitoban leaders already know, the end of the Canadian Wheat Board would have a detrimental effect on the Port of Churchill and the economic future of the North generally. Nicholson also provided evidence that it would be equally disastrous for Canada’s farmers. We need to follow this story as it unfolds.

Oscar Lathlin, Minister of Aboriginal and Northern Affairs, wrote an important letter to the Winnipeg Free Press on February 21. In it, he pointed out that Churchill is the nearest deep-sea port for farmers in north-eastern Saskatchewan and northwest Manitoba. They can save roughly $15 to $20 a ton by shipping their grains through Churchill rather than through the St. Lawrence Seaway via Thunder Bay. Right now the Canadian Wheat Board (CWB) sends grain to the port that provides a greatest advantage to the producer, which means that Churchill gets the grain from the above mentioned areas in Manitoba and Saskatchewan. However, if the Canadian Wheat Board is abolished, independent grain companies will take over. Since they have their own terminals at Thunder Bay and the West Coast, it would be natural for them to send grain there. The impact would be devastating to the affected Manitoba and Saskatchewan farmers, as well as to Northern Manitoba’s economy in general and Churchill’s in particular.

In Wabowden: Mile 137 on the Hudson Bay Railway (Frontier School Division, 2004) we gave a brief history of the political struggle that preceded the building of the Hudson Bay Railway. Powerful business interests in Montreal influenced the political process in Ottawa to prevent the construction of the Hudson Bay Railway. It was just short of a miracle that it was ever built at all. Over the years, it has struggled to survive, but since Omnitrax took it over, the railroad has taken on new life. Now, political forces are at work to destroy it once more. Northerners need to resist, and our mayors and chiefs met recently at The Pas to register their support for the Port of Churchill. We applaud their efforts. Are our members of parliament and the provincial legislatures of Manitoba and Saskatchewan listening? Here is where teachers and students of the North can get involved and do a little lobbying of their own. We need to stand together to ensure the best possible future for the North!

6 November 2007: “Churchill shipments hit three-decade high” [Winnipeg Free Press, B8]

According to reporter Geoff Kirbyson, it was busy at Churchill – 621,000 tonnes of wheat and durum in 2007 for destinations in Brazil, Italy, and Africa. And, it was going to get even better. Ken Ritter, chairman of the CWB, said that “it will ship as much grain as possible through Churchill in the future provided it makes economic sense for farmers.” According to John Fenton, President and chief operating officer of OmniTRAX, which owns the port and the Hudson Bay Railway, its goal was to see that 621, 000 tonnes increase to 1,000,000 tonnes in 2008.

All of this optimism was a spin off from the $68,000,000 federal, provincial, and corporate partnership announced earlier in 2007. Much of this money would be spent on upgrading the railway, particularly between Gillam and Churchill, so that trains could increase their speeds to an average of 40 kilometres an hour, whereas it was now only 16 kilometres an hour in places. Add to this the fact that the shipping season had lengthened by two weeks in the past ten years and “ice-class” ships were increasing in number, and you had a recipe for added growth.

The major challenge for Churchill is expanding its trade. Right now, the CWB is its main customer. The Federal Government under the Conservatives had given indications that it wanted to remove the Board’s monopoly on wheat and barley, but there was strong support from the provincial government and farmers to keep it in place. There were other positive signs, too. Lloyd Axworthy, chairman of the Churchill Gateway Development Corp. thought that Churchill could become “one of the most significant transportation hubs in North America.” It could “lead the way in the development of the Arctic region,” with links “along the mid-continental trade corridor through the U.S. Midwest and into Mexico, an area with between 60 million and 80 million people.”

This article highlighted good news from the Port of Churchill for 2007, and promised more in the future. What could local people do to maintain the current optimism?

28 November 2007: “Tories to introduce barley bill?” [Winnipeg Free Press, A3]

In 2007 , the Conservative Government attempted to remove the Canadian Wheat Board (CWB) as the single marketing agent for barley in Canada. The attempt failed because the wheat board and a group of its supporters took the matter to a federal court judge, who ruled that the government had “overstepped its powers” when it issued a cabinet order to end the “wheat board’s single desk marketing powers on barley.” The judge said that the government had to pass legislation to accomplish this, a decision that the Conservative government challenged at the Federal Court of Appeal.

In the meantime, Jeff Nielsen, president of the Western Barley Growers Association, which wanted an end to the single desk system on domestic malt barley and export barley sales, announced that Gerry Ritz, the federal Minister of Agriculture had told him that the government was going to introduce legislation to deregulate barley marketing. When Patrick McCloskey, Ritz’s press secretary was approached about Nielsen’s remarks, he said that the government’s primary focus at the moment was the appeal, but “we’ll continue working to give Western Canadian farmers the right to marketing choice.”

The three opposition parties are against changes in the CWB mandate “without the clear approval of farmers.” However, Nielsen said farmers are becoming more favourable to marketing choice than they were a year ago. The new government of Saskatchewan was supportive, and in November 2007 the Malting Industry Association of Canada, representing four major malting companies, gave its support to the introduction of legislation to “implement market choice for farmers beginning next Aug. 1 [2008]. At present, the malting companies buy more than one million tonnes of barley from the CWB every year.

Larry Kusch wrote an interesting article. The Canadian Wheat Board is operated by Canadian farmers and is responsible to them and not to the government. Farmers have voted repeatedly to retain the single-desk system, but a vocal minority of farmers (supported by mostly American-based grain companies) has claimed for a number of years that the CWB is a monopoly that prevents them from getting the highest prices for their grain. They claim that their rights have been violated because they can’t sell to anybody they wish. It would appear that this argument is winning support. What would happen to Churchill if the Canadian Wheat Board ceased to be the only marketing agent for wheat and barley in this country? Would farmers turn in droves to the grain companies that have their own port facilities on the West Coast and the St. Lawrence Seaway? The minority Conservative government is unlikely to introduce legislation, when the opposition parties oppose it, but what happens, if they win their appeal? What happens if they win a majority government?

19 November 2008: “Groups pay to put end to CWB’s monopoly” [Winnipeg Free Press, B5]

Larry Kusch reported the names of several groups opposed to the Canadian Wheat Board and what they planned to do to influence the results of a crucial election of five CWB directors in the fall of 2008. One of them was the National Citizens Coalition (NCC), which advocates ‘more freedom through less government.” When Stephen Harper was head of this organisation from 1998 to 2002 , it lobbied for abolition of the CWB’s monopoly on wheat and barley sales, which explained his continued opposition to the Board after his election as Prime Minister of Canada. His efforts to end the monopoly had been unsuccessful because eight of the ten elected farmers on the 15-member Board of Directors continued to be in favour of retaining the single desk marketing agency. The other five members were appointees by the government and in favour of its abolition. That is why the election was so important.

The NCC and other groups and individuals registered as “third-party intervenors,” which gave them the right “to advertise in the director elections in five wheat board districts, including one in Manitoba.” According to Kusch, “the Harper government raised eyebrows at the end of August [2008]” when it removed the limit of $10,000 that third-parties could spend in CWB elections. Besides the NCC, which planned to spend less than $10,000, the Grain Growers of Canada ($2,500), Western Barley Growers Association ($10,000), Western Canadian Wheat Growers Association ($3,000-$4,000) were third parties campaigning against the CWB. The National Farmers Union ($3,000-$4,000) and Real Voice for Choice ($9,000) were among those campaigning in favour of the Board.

Discussion: The term monopoly usually conjures up images of corporations conspiring to raise prices artificially at the expense of the consumer. The CWB, on the other hand, is a collective agency controlled by farmers for the sale of their grain. It is based on the idea that there is strength in numbers. In view of this fact, what might be a better term to describe the agency?

Why would the Harper government remove the cap on election spending? What was it hoping to achieve?

The Harper government has been accused of “bullying” the CWB? What evidence supports this accusation?

21 November 2008: “Report gives wheat board poor marks” [Winnipeg Free Press, B4]

The C.D. Howe Institute, released a study on November 20 calling for the reform of the Canadian Wheat Board because it had “earned poor returns for farmers over the last three years.” In a study entitled, A Bushel Half Full: Reforming the Canadian Wheat Board, University of Regina business professor Sylvain Charlebois and Saskatchewan farmer Richard Pedde “claimed that a Prairie farmer who delivered 700 tonnes of wheat to the board annually earned $18,000 a year less than if he had sold at prices posted in Montana.”

The response of the Canadian Wheat Board was immediate. According to CEO Ian White, the report was based “on false assumptions and oversimplified numbers.” It was impossible to sell the entire western Canadian wheat crop in the United States, and there was no guarantee that any wheat sold there (about 10% of the total production) would get the posted elevator price. In its statement, the CWB maintained that “the pooled returns to farmers last year [2007] were more than $1 a bushel higher than those earned by most American spring wheat and durum producers.” It based this claim on published information from the U.S. Department of Agriculture, but added that “comparing returns was problematic, since Canadian producers must market 80 per cent of their milling wheat offshore.”

When asked why the Institute published its report in the middle of an election for CWB directors, Benjamin Dachis, a policy analyst with the Institute, said they didn’t think it would have much impact, because “for the most part, people had made up their minds.”

Discussion: What was the major thrust of the CWB’s argument in response to the report by the C.D. Howe Institute? Was it convincing? If a farmer got on average $1 more a bushel in Canada as compared to his American counterpart, how much more would he have on 10,000 bushels of sales?

Collective action of any kind is viewed with suspicion in some circles because it diminishes individual rights (See where the C.D. Howe Institute stand on this issue). Traffic lights at a busy intersection have the same effect. When marketing grain in competitive world markets, does a collective agency like the Wheat Board have an advantage over an individual farmer trying to do the same thing?

Although Benjamin Dachis dismissed concerns about the timing of the report, it was issued one week prior to the deadline for ballot return. Would that have been enough time for people to change their minds?

This article was by Larry Kusch. Did he provide enough information for you to assess the validity of the report?

8 December 2008: “Wheat board’s monopoly wins big vote of approval: Elections bolster single desk” [Winnipeg Free Press, A4]

The Wheat Board monopoly had been under serious attack from the Conservative government of Stephen Harper, ever since it came to power in Ottawa. However, in late 2008, elections for five seats on the 15-member Board of Directors, resulted in wins in four of them by farmers firmly committed to that monopoly. Stewart Wells, President of the National Farmers Union, described it as a “huge victory for farmers,” because they had “stood up to Harper’s vow to ‘walk over’ any opposition to his plan to demolish the CWB.” Wells called on the Conservative Party to back off because 80 per cent of the farmer-elected board members supported “the single-desk marketing advantages and a strong role for the CWB.”

The winning candidates faced opponents who wanted a “duel market” that would allow farmers to either “deliver grain to the board or sell it on the open market.” Indeed Rolf Penner, Barry Reimer, and Curtis Sims “ganged up during the election in an effort to defeat Bill Toews, the successful candidate, and Reimer said he was “stunned” that they did not win. (Toews got 1775 votes, Penner 730, and Sims 370.) Elections were held in all three Prairie Provinces and voter turnout varied between 48.2 and 57.9 percent.

Discussion: From the standpoint of the Port of Churchill, it is important to maintain the Canadian Wheat Board, because it ensures that a percentage of prairie wheat exports go through this Northern Manitoba port. For farmers like Penner, Reimer, and Sims, it is more important to be able to market their grain freely. This has particular appeal to farmers with easy access to American markets, especially when prices there are higher than what the Canadian Wheat Board can pay. Opponents argue that this is short-term thinking and that the collective bargaining power of the CWB is vastly superior in the long run to that of individual farmers. Whatever the outcome of the debate, grain will continue to move through the Port of Churchill, at least for the time being.

9 January 2009: “Wheat board changes hit snag” [Winnipeg Free Press, B5]

It appeared that the Conservative government of Steven Harper had decided against introducing legislation to end the Canadian Wheat Board’s monopoly on the marketing of barley. According to Larry Kusch, this was a response to the recent Wheat Board election of farm directors where four of the five elected farmers supported the Board’s monopoly. The National Farmers Union was also in support of the “wheat board single desk” because it gave the farmers “more clout in global markets.” However, according to Kevin Bender, president of the Western Canadian Wheat Growers Association, which wanted to end the monopoly, the government’s decision was the result of Canada’s “economic woes” and the “Conservatives’ tenuous hold on power.” Certainly the opposition parties were on the side of the Board, but Morris farmer Rolf Penner was hopeful that the new Liberal leader Michael Ignatieff might support a voluntary wheat board because it was “more in tune with Liberal principles than a hard-line monopoly.”

Discussion: Why is it difficult for a minority government to introduce controversial legislation? Why would the Conservatives be reluctant to push for an end of the monopoly, when four of the five new farm directors on the Wheat Board were in full support of that monopoly?

12 February 2009: “CWB gains big returns for farmers; Ritz sour: Minister focuses on loss” [Winnipeg Free Press, B5]

It’s been a banner year for the single-desk Canadian Wheat Board. Its annual report, released on February 11, showed that producers’ returns jumped 57 per cent in 2007-2008.” However, journalist Mia Rabson noted that federal Agriculture Minister Gerry Ritz “threw cold water on the excitement when he tabled the report in the House of Commons, accusing the board of bad risk-management practices and demanding an explanation for a $90-million net loss in a contingency fund.”

All this was pretty disheartening to Brita Chell, the CWB’s chief financial officer, “considering the year was so successful for farmers.” And it truly was, with returns for wheat, barley and durum at $7.2 billion with wheat up 47 percent and durum and malting barley up a whopping 94 percent. Chell said “high market prices were the main reason for the returns, but noted the CWB was able to do a great job capturing the prices at their peak to maximize returns to producers.”

One would think this would bolster the position of the Single Desk, but Ritz was unconvinced. He “was troubled the Winnipeg-based agency rang up a large deficit in a contingency fund that underwrites risk associated with cash trading and the board’s producer payment options programs.” These were developed to give producers “greater flexibility and allow them to lock in at certain prices.” Because of the deficit, Ritz said that the CWB had not properly managed the risk and told that House of Commons that he had “asked the board to explain the losses and provide assurances they’ve changed their practices.” According to Rabson, changes have already occurred and an external consultant hired last fall “to validate the changes that were made.”

Discussion: Although she didn’t explain the contingency fund in detail, it looks as if the CWB was unable at times to get the locked in prices for the producers’ grain, making it necessary to pay them the difference. This cost the CWB money, but benefited the farmers who had locked in at the higher prices. Do you think any of those farmers would have been complaining about the deficit and the Single Desk. Why does a banner year like 2007-2008 strengthen the position of the Board, and why is it good news for Churchill?

2 June 2009: “Port of Churchill expecting longer season, banner year” [Winnipeg Free Press, B5]

According to Larry Kusch, the Port of Churchill was going to have a good year. Why the optimism? According to Michael Ogborn, managing director of operations with Denver-based OmniTRAX, it was because the Canadian Coast Guard was providing an icebreaker service for the region. Moreover, the port was “acquiring the use of an ice tug to complement its other tugboats.” Consequently, the port was scheduled to open on July 1, three weeks earlier than anticipated, and remain open until late November, which would mean “an additional five to six weeks this year.”

The main cargo would continue to be outgoing Canadian wheat. Last year, the port “moved 424,000 tonnes of wheat” on behalf of the Canadian Wheat Board which was well under the port’s capacity of 1,000,000 tonnes. However, this year there could be more, perhaps up to 500,000 tonnes, depending on prairie grain yields in the fall. According to a board spokesperson, it already had “close to 100,000 tonnes of grain in place at the terminal in Churchill, with customers ready to buy it.”

In addition to the wheat, there was a possibility that peas and canola could be exported through Churchill in 2009, and OmniTRAX was also looking at “exporting other products through the facility, including wood pellets and even farm machinery.” Fertilizer would be imported again this year through the port.

OmniTRAX was considering the construction of a “bulk handing facility for non-grain products,” and had discussed this proposal with “a variety of potential partners,” although nothing definite had been achieved at time of writing.

Update (3 September 2009): Darren Kinden, Principal of Duke of Marlborough School, Churchill, provided the following information concerning the 2009 shipping season for the Port of Churchill.

1. When did the shipping season open this year? (In other words, when was the first day that shipping was possible?)

Late breakup this year. Historically ships are able to arrive the last week in June. This year it was mid July for ice break-up. August 11, 2009 was the date of their first vessel.

3. Did OmniTRAX get the ice tug that Larry Kusch wrote in June that they were getting?

The Port did contract Tug services for July 1, 2009. However, due to the ice conditions in the North they damaged their tug in ice and turned back for repair. The intention was there for July 1, 2009, but did not arrive.

4. How much grain has gone through the port already, and how much more are they anticipating?

The Hudson Bay Port is anticipating a 550,000 ton season. As of tonight (September 3) they should have reached over 200,000 tons of grain.

5. Have they had any other commodities going out or cargo coming in that is worth mentioning?

Discussion: There has been a great deal of interest in the Port of Churchill in the wake of global warming, and the belief that the Arctic Ocean is about to become ice free. In view of that accepted wisdom, why would the Port of Churchill increase its ice breaking capacity? Is this simply a short term strategy to improve the port’s present advantages? Or, is there a possibility that OmniTRAX is planning for the future, regardless of the ups and downs of climate? If you were promoting the port, what additional exports or imports would you try to get through this facility?

What additional insights does the update by Darren Kinden provide about current conditions at the port and the 2009 shipping season?

30 October 2009: “Wheat exports big in Churchill” [The Winnipeg Free Press, B4]

In spite of the fact that the shipping season started later than usual because of ice conditions, the Port of Churchill “handled 529,000 tonnes of Prairie wheat,” in 2009, the “second-highest wheat volume” that the Canadian Wheat Board had shipped through the port in 30 years. “In 2007, the port handled 621,000 tonnes, the largest volume since 710,000 tonnes went through the port in 1977.”

The shipping season began on August 12 and ended on October 27, when the Venta left the port with “23,000 tonnes of wheat and durum destined for Europe.” Most of this wheat came from northern Manitoba and Saskatchewan.

Discussion: The article did not indicate when the shipping season usually begins. In view of the recent downward trend in world temperatures and the possibility of colder years, what could this mean for future shipping? On the other hand, how could improved facilities increase the capacity of the port, even if the shipping season became shorter in the future?