World Grain - October 2014 - 27

FEATURE: CANADIAN GROWERS BLINDSIDED

by Leo Quigley

Officials hope to prevent repeat of 2013-14 when
unanticipated record crop and historically cold
winter negatively impacted country's grain industry

n a Prairie small town everyone talks
about the weather and, on coffee row,
farmers talk about crops.
Across Western Canada hundreds of
meteorologists broadcast Environment
Canada's weather predictions and agricultural consultants and investors at
ICE Futures Canada, (former Winnipeg
Commodity Exchange) bet on the weather
and crop yields with enough confidence to
risk money on their predictions.
Without question, predicting the
weather and guesstimating crop yields
is a multi-million dollar business and
critical to the lives of roughly 200,000
farmers in Western Canada.
However, in the autumn and early winter of 2013-14 nobody predicted the possibility of an Arctic Vortex. In fact, no one
on coffee row had ever heard of an Arctic
Vortex when three days before Christmas
temperatures plunged to a record -40.9 degrees C in Southend and -39.2 degrees C
in Spiritwood, Saskatchewan, and where
Winnipeg recorded its second-coldest
winter in 75 years. Nearly 1,000 homes
had frozen pipes and families went without running water for days or weeks.
The frigid weather hit transportation
systems in both sides of the Canada/U.S.
border. In fact, Walmart, a company you
would expect to be a world class leader
in transportation logistics, suffered a
5% drop in its first quarter that Chief
Executive Officer (CEO) Doug McMillon
attributed largely to severe winter weather
"Like other retailers in the United
States, the unseasonably cold and disruptive weather negatively impacted
U.S. sales and drove operating expenses
higher than expected," he said in a statement. Not only did frigid winter weather
impact the company's store traffic, it
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disrupted the entire supply chain, including the trucking industry.
The second misfire was the fact that
crop prognosticators failed to warn the
industry that a massive crop was taking
shape on the Prairies - a crop that was
something Prairie farmers hadn't seen
for 100 years - a record 75-milliontonne harvest that shattered the previous record set in 2009 by 28% and 50%
higher than the average for the West.
Most farmers didn't see it coming,
grain handlers didn't see it coming, grain
marketers didn't see it coming, grain export terminals didn't see it coming and
the railways didn't see it coming.
And there was no time to prepare.
CAN IT HAPPEN AGAIN?
The result of this lack of vital information was calamitous. The railways
were unprepared and couldn't move the
massive crop quickly enough to satisfy
farmers; farmers were frustrated and losing money as prices plunged; the federal
government was hit with the brunt of
complaints and passed legislation complete with fines to pressure the railways
into moving more grain; and Canada's
reputation as a reliable supplier worldwide was damaged - and not only for
commodities such as foodstuffs, but for
products such as lumber as well.
David Lindsay, president and CEO
of the Forest Products Association of
Canada, said in a statement: "The forest products industry is one of the sectors that faced downtime and lost revenue because of the lack of an adequate
transportation system in this country,
Canada's prosperity depends on exports,
yet we often can't ship our products to
market in a timely fashion."
He also noted that the grain industry

in Canada exports $21 billion of product each year while the forest products
industry exports $28.5 billion.
The question now for Canada's grain
industry, among others, is: Can this happen again? Can another extremely cold
winter and near-record production once
again create a transportation bottleneck?
The simple answer is: Nobody knows
for sure.
The question calls for an accurate,
long range weather forecast and an accurate estimate of what the 2014-15
crop (including all grains, oilseeds and
pulses) will come off the fields this fall.
INDUSTRY OFFICIALS WEIGH IN
In attempting to find an answer to the
question, World Grain talked to a variety of people in the grain industry, with
most saying that the railways must solve
the problem, most suggesting that more
"capacity" is needed, and there should be
more "collaboration" within the industry.
Curt Vossen, president and CEO
of Winnipeg, Manitoba-based James
Richardson International Ltd., told World
Grain: "We're spending significant money speeding up our elevators, trying to
figure out how we can go to even faster
load times on even bigger trains, because
we're moving from 100-car trains to 108car trains soon. We're spending a significant amount of money and we're not
alone. There are a lot of different companies - Cargill's announced new capacity
and Viterra announced a couple of newbuilds and the purchase of an elevator in
Southern Alberta plus increases in capacity. I frankly can't think of anybody that
isn't doing something right now.
"These are all big projects. When
you build an elevator today it is $40
million to $50 million. What we did in
Vancouver (terminal expansion) was
$150 million. Vittera announced a $100
million investment at its Pacific terminal on the South Shore (of Burrard
Inlet, Vancouver). One of the terminals
in Thunder Bay that we bought with
the Viterra transaction that had been
closed for three years has been brought
into production. We've loaded a bunch
27

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World Grain - October 2014

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