After harvesting a record crop, Prairie farmers are unable to move it. Some haven’t even been able to deliver grain they had contracted for movement last fall, and to make matters worse, they can only watch as grain prices fall across the West in spite of strong offers from international buyers.
Farmers are encountering basis levels for wheat up to and over $3 per bushel — in many cases double what the historical basis levels have been. They see country elevators plugged to the roofs, but west coast terminals sit empty and scores of ships clog harbours for weeks waiting for grain, all the while charging demurrage.
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Worse yet, farmers see other ships draw anchor and head off to Brazil or some other country that competes with us, and farmers, as they sit on bins and bags and piles of grains, hear that Canada has become an unreliable supplier of grains.
Farmers read the U.S. may need to ration soybean sales due to tight supply, and they watch as soybean prices climb. Yet, canola, supposedly a superior oilseed, sits at the lowest price in years. They see oat millers in the U.S. paying all time record prices for oats, importing oats from Europe, and even talking of closing mills due to lack of oats, yet basically no oats have moved off Prairie farms.
Go into any Prairie coffee shop and you instantly hear what the problem is. Probably 99 per cent of farmers lay the blame for this mess entirely on the railroads. Sure, they are also angry at governments and grain companies for not doing more to make the railroads move the grain, but in most farmers’ minds, the only reason grain prices are so low, basis levels so high, and grain is not moving is the railroads.
“It isn’t that they can’t see the solution. It’s that they can’t see the problem.” — G. K. Chesterton
On March 7, Ottawa announced an Order in Council forcing CN and CP to each haul a minimum 500,000 tonnes of grain a week or face penalities up to $100,000 per day. Immediately a number of ag commodity groups claimed victory.
But let’s look at the numbers. The 5,000 cars mandated per railroad is less than the railways moved during some weeks last fall, and is actually 500 cars less than they have already said they are gearing up to move this spring.
Worse yet, the order only lasts for 90 days, and falls during road-ban and seeding season.
We need to recognize, however, that this 90-day order is the only stipulation on railroads to move grain. The Canada Transportation Act simply states that railroads must offer service to any shipper that requests it. Grain takes no precedence over dry goods, coal, lumber, potash, containers or oil.
It is up to the railroad to decide which goods it will haul and when. This is not to say railroads do not want to haul grain. Grain movement is not something they want to lose. But at the same time, they have other customers also demanding their service. Just as you are limited by equipment, weather and finances on the amount of land you farm, they are limited by equipment, weather and finances on how much they can haul.
Yes, railroads may be able to lease more cars and pulling power, and move more grain. But do they have the crew to run those cars? How many more trains can our track infrastructure handle?
Some farmers say we need a third track to the coast, but we better be sure. A new track from the West Coast to the central Prairies would likely cost tens of billions — a bigger amount more than farmers could pay alone and something the federal government would likely not even consider.
The projected cost of a high-speed rail link over the 240 km from Edmonton to Calgary is over $5.0 billion. What would be the cost of a new track 10 times that long from Saskatchewan to Vancouver, with a third of it over and through three mountain ranges, not to mention the grain collection infrastructure we would need to build along the track?
No, rail companies alone are not the entire solution. More importantly, they are not the entire cause of the problem.
Recognizing a problem is the first step to solving it — Sanya Friedman
Nor am I willing to lay all the blame on the grain companies. Like the railroads, they are doing exactly what they are expected to be doing in a market economy — maximizing ownership profits (unlike farmers who seem more concerned with maximizing production than in maximizing profits).
In my opinion, the real problem lies with farmers themselves. We have bought into the notion espoused by government, industry and even our advanced education system that we, as individual farmers, can compete in a free and open market.
What those parties never tell farmers is there have never been free and open commodity grain markets in Western Canada. From the beginning we have had to contend with the long distances to our customer base.
I firmly believe there is no better system than a free and open market when there are numerous buyers and sellers sharing equal market power. Without question, in agriculture there is a large number of sellers (farmers), but the other side of the equation has always been dominated by an oligopoly of a few very large, very powerful players. As individual farmers, we simply have no market power in selling commodity grains.
Our grandparents recognized the problem and built the co-operative prairie pools to give farmers market power, only to see the next generations sell the system to the very same companies who dominated their markets.
Some governments tried to give farmers market power. In July 1935, the R.B Bennett Conservatives tried to help farmers by creating the Canadian Wheat Board (CWB) only to have succeeding governments corrupt the purpose and intention of the CWB until the Harper Conservatives finally emasculated it in 2012.
The CWB wasn’t perfect and this isn’t a call for its return, but we are now seeing that it also had a lot more value than many farmers or our government gave it credit for. It definitely gave farmers a voice against the power of the railroads, grain companies and government. It gave all farmers equal access to a very constricted grain movement system. It also managed the logistics of grain movement off the Prairies.
The movement problems we are seeing now are the direct result of the government not addressing (or understanding) the critical role the CWB had in grain logistics and ensuring another body was in place that would fulfill this essential role.
We cannot solve our problems with the same thinking we used when we created them — Albert Einstein
The real problem is us, the farmers. What we say is far too often exactly opposite of what we do.
I find it amazing that some of the loudest farm voices demanding more rail service, or more regulation of railways and grain companies, or even for the nationalization of these services are the same farmers who were demanding less market interference and regulation on farms and grain marketing. Too many farmers only believe in the free market when it works for them.
Most farmers and many Canadians still believe we are the breadbasket of the world. Canada isn’t and hasn’t been for a long time. China, India, the United States, Russia, France, Australia and, by some accounts, Pakistan all grow more wheat than Canada.
We say we believe the buyer is always right, but continue to insist customers buy what we want to grow. “You don’t want GMO? Well, tough luck,” we reply. “There is nothing wrong with GMOs.” “It may not be the CWRS 1, 13.5 per cent protein wheat you ordered and expected, but, hey, the falling number means it is just as good.”
We compete in a world where most exportingnations have commercial storage that can accept most of the production right at harvest. Yet in the West, we have commercial storage for less than 10 per cent of average production. Is it any wonder if what buyers want is not in export position when needed?
Meanwhile, Canadian farmers fight and argue over ideology. We hinder, and even sell off or give away any semblance of an association that tries to level the market-power playing field. Instead of working as one voice, farmers and our government further diminish the single voice by creating numerous small competing commodity organizations, often loaded with industry representation whose ultimate goals may be opposite to those of farmers and rural society.
Too often we measure farm success only by the financial ratios and our acreage with little thought for the health of the land or the rural community around the farm. Is a business truly successful if it so isolates itself no one wants to continue it?
Don’t get me wrong, not all Prairie agriculture is becoming a basket case. There are many very successful farm operations, some of them featured in the pages of this magazine. But these are people who willingly stepped away from the commodity mould. They have found and developed their own niche market. Or, like organic growers, they have banded together to offer products outside the marketing channels dominated by a few global players.
We no longer are the greatest country in the world in which to farm. But we can be again.
It will take a new attitude towards agriculture. We will have to relearn the basic business principle that the customer is always right. We will have to again find a way to work together co-operatively rather than competitively.
