Dennis StephensC d G i C ilCanada Grains Council
Australian Grains Industry Conference 2010Melbourne, Australia
28th July 2009J y 9
80% of 80% of CCCanada’s FarmlandCanada’s Farmland
Prairie RegionPrairie Region
dExport DominatedWestern Canadian Production/Exports/ p
60
40
50
30
4
million to
nnes
Production
Exports
10
20
m p
0
10
6 82004 2005 2006 2007 2008
Grain Logistics
Key objective : Ensure that grain is market pulled from in land storage to vessel
Primary and terminal elevators are high throughput facilities, not designed for long term storage
Key challenge: Effective / efficient interface between the Key challenge: Effective / efficient interface between the supply links
ProducersP i l tPrimary elevatorsRailwaysTerminal elevatorsLakersTransfer elevatorsOcean freightOcean freight
Producer LinkProducer LinkPrairie Farm ConsolidationPrairie Farm Consolidation
2001 2006140 000
160,000
20012006
100 000
120,000
140,000
60 000
80,000
100,000
20 000
40,000
60,000
0
20,000
Number of Farms Acres (000's)Number of Farms Acres (000 s)
M d ti d tiMore dramatic reduction: CWB Permit HoldersCWB Permit Holders
120,000
80,000
100,000
40,000
60,000
20,000
4
0
C Ch iCrop Choices
12
14
ares
6
8
10
of h
ect
Wheat
Canola
2
4
6
lion
s o
BarleyPulses
0mill Pulses
Canada’s Cold Climate = Short Growing Season:Long‐term storage = On Farm StorageFarm Storage
P i El t Li kPrimary Elevator LinkNumber of Primary ElevatorsNumber of Primary Elevators
1400
1600
1000
1200
1400
ator
s
600
800
1000
mbe
r of e
leva
200
400
600
num
0
200
1995 20101995 2010
Primary elevator:y
High Throughput: transfersHigh Throughput: transfers grain from farm to rail
Average 6 x storageg g
Vast Distances to Market
1700 km1700 km3500 km3500 km3500 km3500 km
Rail link: Transfers grain from primary elevators to t i l M j R il CP d CNterminals ‐ 2 Major Railways: CP and CN
R ilRailways
2 major railways: CN and CP – publicly traded companies –share varies between 48 and 52% ‐ near monopoly powers4 5 p y p18,000 route miles of track13% of track operated by short line railways – 2% of 3 p y ytonnage hauled (declining)Size of rail car fleet / power / crews determined by railways, varies by demandvaries by demandTrains increasing in size: 3 100‐car spots along a line made into two 150 100‐tonne hopper car trains with engines at into two 150 100 tonne hopper car trains with engines at front and in middleCar turn around times declining: 14 days
lRailway ratesRailways publish specific car rates
CP per tonne rateCN commodity specific per car ratesCN commodity specific per car rates
Differential rail rates (varies by railway)By corridor: e.g. Thunder Bay higher than Vancouver; y g y g ;Vancouver higher than Prince Rupert (10%)By season: rates to ports changed during year, often changing differential relationshipspBy number of cars spotted:
Single car rate50 99 cars $4 00/tonne saving50 ‐99 cars ‐ $4.00/tonne saving100 plus cars ‐ $8.00/tonne saving
Non published private contracts
Primary Elevator Loading Capacity
700
800
500
600
700
vators
0 24 Cars
300
400
5
mbe
r of E
le 0‐24 Cars25‐49 Cars
C
100
200Num 50‐99 Cars
100+ Cars
0
Grain Movement
1800020000
120001400016000
nes
680001000012000
000's to
n ChurchillUSEast
2000400060000 East
Pacific
0
CWB R il C All tiCWB Rail Car AllocationCWB export wheat / feed barley /malting barley domestic food wheat CWB‐ export wheat / feed barley /malting barley: domestic food wheat /barley:
Negotiates car supply from railways: varies by railways / shipping corridors corridors Allocates car requirements to companies (or specific primary elevator) by commodity/ grade / destination to meet port sales requirements
Employs numerous rail car allocation systems to grain companies:Awards Program (70‐75 % of CWB rail movement)
Based on percentage of business within a geographic areaTendering Program by shipping corridor (14%)Advance Awards Program(10‐15%)g
Based on percentage of business plus needForward BookingIdentity Preserved Sales Requirementsy qSupply Agreements
l llCWB Terminal Allocation
Large grain companies (Viterra, Richardson, Cargill) have their own terminal elevators in Thunder Bay and VancouverPrince Rupert Terminal owned by Viterra (50%+), Richardson (30%), Cargill (20%)Richardson (30%), Cargill (20%)Mission Terminal in Thunder Bay and Alliance Terminal in Vancouver have negotiated lower fobbing rates than larger companiescompaniesChurchill terminal owned by shortline railwayCWB will negotiate fobbing agreements with terminals g g g(not all terminals)CWB has authority to allocate cars to specific terminalsCWB l b t % ifCWB sales about 35% cif
N B d R il C All tiNon Board Rail Car Allocation
Grain companies negotiate rail car supply with railways by shipping corridorpp gRequirements refined two weeks before cars are spottedGrain companies will ensure necessary terminal p yauthorizations are in placeRailways will confirm terminal authorizations are in place before informing grain companies on Thursday or Friday before informing grain companies on Thursday or Friday the final car spotting allocations to specific primary elevators that will begin the following Monday for delivery g g y yto specific terminal elevators the week followingCar orders not fulfilled will be carried over to next week but
b ll t d t diff t i l t may be allocated to a different primary elevator
T i l A th i tiTerminal AuthorizationsMost shippers without terminal facilities negotiate a 1‐ 5 year arrangement with a terminal elevator company
Numerous incentive and disincentive clauses for Numerous incentive and disincentive clauses for volume/performance
Primary elevator shipper will contact terminal elevator for y ppspecific shipping authorizations to ensure space availability confirming number of cars, commodity, shipping week to be loaded in country shipping week to arrive at terminal be loaded in country, shipping week to arrive at terminal and necessary vessel informationRailways will ensure shipper has terminal arrangements in y pp gplace before cars spotted to primary elevatorFinal spotting dates may be modified depending on il /t i l il bilitrailcar/terminal availability
SummarySummaryCanada’s grain production area is a long way from ocean g p g ytransportationCanada’s grain logistic system is based on railcar ll ti b t j il i l i b th di t allocations by two major railways involving both direct railway/grain company negotiations for Non‐Board grains and railway/Wheat Board /grain company negotiations for y g p y gBoard grains Canada’s railways enjoy near monopoly powers: G t i d il i i lGovernment imposed railway revenue cap is in placeCanada’s primary/terminal elevators are designed for high throughput, not storagethroughput, not storageIncreasingly Canada’s grain logistics system is a just in time system designed to meet ocean vessel arrivals
ConclusionsConclusionsGrain shippers often complain about railway level of servicepp p yAbout 10 years ago, the Government established a Grain Monitoring Program (GMP) by an independent third party
dit t id t h th f f auditor to provide a report each year on the performance of Canada’s grain handling and transportation systemThe GMP has provided useful information on Canada’s The GMP has provided useful information on Canadas grain handling and transportation performanceIn recent years shippers have increasingly been complaining about railway serviceGovernment has commissioned a railway level of service review that is being undertaken by a three person panel review that is being undertaken by a three person panel that has commissioned research and invited submissions Final report expected before end of 2010: may lead to p p ychanges
Thank you